DFA2 - FundAdvice.com - The best mutual funds: DFA or...

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search. .. Home Articles Ask Paul Workshops Radio 401k Subscribe Tools Money Mgmt. USER RATING: / 295 POOR BEST The best mutual funds: DFA or Vanguard? | Prin Rate Written by Paul Merriman Wednesday, 15 August 2007 Editor’s note: We have been teaching investors how to use Vanguard and Dimensional Fund Advisors more than a decade. Here’s an update on how they compare. The most important favor that long-term investors can do for themselves is to invest in the right kind assets, or asset classes. Examples of asset classes are stocks and bonds. More specific examples are large-cap value stocks, emerging markets stocks, high-yield bonds and short-term corporate bonds. As noted in an article on our web site called “The ultimate buy-and-hold strategy,” the choice of asse accounts for approximately 96 percent of the long-term return of any portfolio. Do this right, and you of the way there. Do this wrong, and at best your money is not working hard for you; at worst, you’r too much risk and you could get clobbered by the market. The other 4 percent of the return comes from the times that you buy and sell and from the specific a put in the portfolio: which funds, which stocks, which bonds. Stated another way, the 96 percent is about understanding the job that needs to be done. The 4 perc about picking the very best tools to get that job done. This article is about picking the very best tools important job. Ironically, most investors spend most of their time on the decisions that make just 4 percent of the d and very little time on decisions that make 96 percent of the difference. That is not to say that the 4 percent is inconsequential. The opposite is true, as we shall see, and this about that 4 percent. Once you understand asset allocation and understand what asset classes you n should find the most efficient, lowest-cost, least-risky and most productive mutual funds for your mo There are lots of places you can invest your money and get an adequate return. But if you’re investin long time, you should hold out for great investments instead of settling for those that are merely goo I’m going to compare and contrast two great families of low-cost, no-load mutual funds that do a lot seemingly small things right: Vanguard and Dimensional Fund Advisors. You’re probably familiar with Vanguard, a very large fund family that specializes in index funds and is in the industry for cutting its expenses to the bone. Vanguard is our favorite fund family for do-it-you investors. We often recommend these funds to investors of all ages and all levels of wealth. Dimensional Fund Advisors funds have some important advantages over Vanguard, as we shall see. I those advantages over time could mean an extra two percentage points of annualized return. LITTLE THINGS ADD UP
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This note was uploaded on 05/10/2008 for the course FIN 367 taught by Professor Han during the Spring '08 term at University of Texas at Austin.

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DFA2 - FundAdvice.com - The best mutual funds: DFA or...

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