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DFA Funds

F5 Financial is an approved advisor with Dimensional Fund Advisors. We can help you leverage DFA funds to build a robust investment portfolio.

DFA Funds: A Superior Approach to Investment Management

At F5 Financial, we use the investing methodology developed by Eugene Fama, an economist and winner of the Nobel Memorial Prize in Economic Sciences. Fama’s methodology focuses on capturing the “key” dimensions of the marketplace as investment indicators. These dimensions are:

  • The equity premium – Stocks perform better than bonds over the long term.
  • The size premium – Small companies outperform large companies over the long term.
  • The value premium – Value companies outperform growth companies over the long term.
  • The profitability premium – More profitable companies outperform less profitable companies over the long term.

F5 Financial is an approved advisor with Dimensional Fund Advisors, an asset manager whose mutual funds use Fama’s dimensional methodology. As an approved advisor with DFA, we can invest our client’s portfolios in DFA’s mutual funds, which are not available to the general public.

10 DFA Principles to Improve Your Odds of Success

Pursuing a Better Investment Experience

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Embrace Market Pricing

The market is an effective information-processing machine. Each day, the world equity markets process billions of dollars in trades between buyers and sellers—and the real-time information they bring helps set prices.

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US-Based Mutual Fund Performance, 2001–2020

US-Based Mutual Fund Performance, 2001–2020
Big 2

Don’t Try to Outguess the Market

The market is an effective information-processing machine. Each day, the world equity markets process billions of dollars in trades between buyers and sellers—and the real-time information they bring helps set prices.

Big 3

Resist Chasing Past Performance

Some investors select mutual funds based on their past returns. Yet, past performance offers little insight into a fund’s future returns. For example, most funds in the top quartile of previous five-year returns did not maintain a top-quartile ranking in the following five years.

Percentage of Top-Ranked Funds That Stayed on Top

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Funds Remaining in Top Quartile of Returns in the Following 5-Year Period (2010–2020 average)

Growth of a Dollar, 1926–2020 (compounded monthly)

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Big 4

Let Markets Work for You

The financial markets have rewarded long-term investors. People expect a positive return on the capital they supply, and historically, the equity and bond markets have provided growth of wealth that has more than offset inflation.

Big 5

Consider the Drivers of Returns

There is a wealth of academic research into what drives returns. Expected returns depend on current market prices and expected future cash flows. Investors can use this information to pursue higher expected returns in their portfolios.

Past performance is no guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio.

  • Equities

     

    • Company Size (Market Capitalization)
    • Relative Price (Price/Book Equity)
    • Profitability (Operating Profits/Book Equity)
  • Fixed Income

     

    • Term (Sensitivity to Interest Rates)
    • Credit (Credit Quality of Issuer)
    • Currency (Currency of Issuance)

Download Your Free Copy of "Pursuing a Better Investment Experience"

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Big 6

Practice Smart Diversification

Holding securities across many market segments can help manage overall risk. But diversifying within your home market may not be enough. Global diversification can broaden your investment universe.

Big 7

Avoid Market Timing

You never know which market segments will outperform from year to year. By holding a globally diversified portfolio, investors are well-positioned to seek returns wherever they occur

Annual Returns by Market Index

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Avoid Reactive Investing

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Manage Your Emotions

Many people struggle to separate their emotions from investing. Markets go up and down. Reacting to current market conditions may lead to making poor investment decisions.

Big 9

Look Beyond the Headlines

Daily market news and commentary can challenge your investment discipline. Some messages stir anxiety about the future, while others tempt you to chase the latest investment fad. When headlines unsettle you, consider the source and maintain a long-term perspective.

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Big 10

Focus on What You Can Control

A financial advisor can offer expertise and guidance to help you focus on actions that add value. This can lead to a better investment experience.

Diversification does not eliminate the risk of market loss. There is no guarantee investment strategies will be successful. This information is for illustrative purposes only.

  • Create an investment plan to fit your needs and risk tolerance.
  • Structure a portfolio along the dimensions of expected returns.
  • Diversify globally.
  • Manage expenses, turnover, and taxes.
  • Stay disciplined through market dips and swings.

Content courtesy of Dimensional Fund Advisors

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Related Reading: How Are DFA Funds Different than Index Funds?

DFA funds differ from conventional investing & index investing. Read here to see how DFA funds differ & the benefits of this investment strategy.

Ready to Start Investing in DFA Funds?

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