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bogue e-news ::        

Bogue Asset Management’s Quarterly Investment Letter In my latest newsletter I discuss how the first half of the year has been characterized by the reversal of market trends set in motion by last years U.S. presidential election and how tactical overallocations towards overseas stocks and non-traditional bonds have paid off ........[See More]

    

How your advisor is compensated does matter.  Lately there has been a blurring of the lines with the use of the term “Fee-Based” to describe how one is compensated.  I’ll tell you why Fee-Based is not Fee-Only and the difference can be substantial: [See More]

 

    

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Dimensional Fund Financial Advisor

Bogue Asset Management is one member of an exclusive society of Fee-Only financial advisors approved by Dimensional Fund Advisors (DFA Funds) to offer their funds for client portfolios.  DFA can provide added value to meet our client’s needs by providing effective investment strategies at very low cost.  To learn more about DFA Funds, please contact Jeff Bogue at 207-646-2478 or 207-699-1331 Ext. 6331 or e-mail him at bogueam@maine.rr.com.
 
Dimensional Fund Advisors was founded in 1981 by David Booth and Rex Sinquefield to apply academic research on capital market behavior to the practical world of managing investment portfolios. Rex Sinquefield was one of the original individuals that brought the concept of the index fund to the market.  The firm maintains close ties with the University of Chicago and other centers of research for financial economics. Board members and consultants include some of the nation’s most distinguished academic theorists, including Eugene Fama, Kenneth French, Roger Ibbotson, as well as Nobel laureates Robert Merton and Myron Scholes.
 
Dimensional’s approach is based on the belief that markets are "efficient" and that investors’ returns are determined primarily by asset allocation, not market timing or stock picking. All portfolios use a passive strategy designed to capture the return behavior of an asset class. The firm has no economists forecasting business cycles or interest rates, no investment strategists shifting allocations between stocks and bonds, and no analysts searching for "undervalued" stocks.  While conventional index managers also employ this approach, DFA differs because they do not track popular market benchmarks; they capture separate dimensions of returns accompanied by independent sources of risk. The firm also places emphasis on minimizing trading costs. Unlike conventional passive managers who attempt to replicate an index, Dimensional employs a trading strategy that allows for slight variations in the portfolio as compared to the index in return for substantial cost reductions and hence improved total return. The firm claims to achieve negative trading costs in illiquid market sectors such as U.S. small company stocks.
 
Beginning in 1989, the firm began offering its low-cost institutional mutual funds to individual investors through a network of selected investment advisory firms. Dimensional does not distribute its funds through direct marketing or conventional broker/dealer firms.  To be approved to access their funds, this required several interviews to determine if our philosophy and approach aligned with DFA’s.  It also required attendance at an educational conference sponsored by DFA to detail their strategies, philosophy, and how to use their strategies for client investment portfolios.  Transactions in Dimensional requires us to place client trades through Shareholder Service Group who’s custodian Pershing maintains an "omnibus" account relationship with Dimensional.  By adhering to this approach, we are able to purchase fund shares in smaller increments compared to DFA’s published minimum of $2,000,000.  All funds are "no-load", although carry transaction fees for individual purchased and sales.  DFA or any other third party does not compensate us for use of its funds.
 
In my ongoing effort to find cutting edge solutions, I am excited to have DFA funds available to my clients.  They represent a great opportunity to enhance the core portfolio strategies in an effective and efficient manner.
 
For more information, check out the following web links:

RIABiz September 13, 2010:  DFA's approach from an institutional perspective

DFA Funds Hard to Buy, Easy to Own, CNBC on MSN