We have added two model portfolios built with funds from Dimensional Fund Advisors. Unfortunately, DFA funds are not available to individual investors and must be purchased through a financial advisor (which typically adds a 1% fee). However, DFA funds are often held up as the gold standard for asset class investing.
DFA’s selection of securities in different asset classes is not constrained by the construction of the common indices, (e.g., the S&P, Russell, etc.). DFA’s asset class construction is based on sound academic research. DFA defines the criteria for each asset class. Thus, some of the DFA funds significantly outperform the commonly followed indices as well as competing funds in the same asset class. The important question is whether a portfolio of DFA funds outperforms a similarly constructed of widely available funds, after paying the financial advisor fee for the DFA funds. The model DFA portfolios here allow a head-to-head comparison.
The DFA – FundAdvice Portfolio uses 10 mutual funds of various asset classes from DFA. The portfolio equally weights US and foreign equities. It includes large and and small capitalization stocks, value stocks, emerging markets, and U.S. REITs. This approach reduces volatility while increasing overall return. The portfolio is described at the FundAdvice website. It also appears in the book Live It Up Without Outliving Your Money! Getting the Most From Your Investments in Retirement by Paul Merriman.
The DFA – Aggressive Portfolio uses 11 mutual funds of various classes from DFA. It includes US and foreign equities; large and and small capitalization stocks; neutral and value international stocks; emerging markets; and a U.S. REIT ETFs. This portfolio is based on the Index Fund Advisors (IFA) 100 Fund. It is their most aggressive all equity portfolio and has had the highest return of their 20 model portfolios.