Does anyone know anything about these advisors?

[nun]

In a recent discussion in international investing I heard two investment advisor companies mentioned

Maseco Financial

MASECO Financial

and Dimensional Funds

Dimensional Fund Advisors: DFA Home

Has anyone any opinions or experience with these firms? I only ask out of curiosity, I run a mile at the mention of "financial advisors"

[LOL!]

DFA is one of the best fund companies out there. There have been many, many threads on DFA on this forum and on the Bogleheads forum that you also participate on. I think you can duplicate the DFA stuff by using ETFs as long as you are willing to work on tax-loss-harvesting and rebalancing yourself.

Here is a pro-DFA article:Blaine Lourd Profile - Executive Articles - Portfolio.com

More links: Analyzing the 'high-fee' DFA-approved advisor's sales pitch.
Low-cost, fixed-fee DFA investment advisors

Also lots of pseudo-celebrity advisors are DFA associated: Rick Ferri, Larry Swedroe, Eric Haas, Paul Merriman, Jeff Troutner, Steve Evanson, Scott Burns, etc, etc.

[nun]

Quote:

Originally Posted by LOL! DFA is one of the best fund companies out there. There have been many, many threads on DFA on this forum and on the Bogleheads forum that you also participate on. I think you can duplicate the DFA stuff by using ETFs as long as you are willing to work on tax-loss-harvesting and rebalancing yourself. Here is a pro-DFA article:Blaine Lourd Profile - Executive Articles - Portfolio.com More links: Analyzing the 'high-fee' DFA-approved advisor's sales pitch. Low-cost, fixed-fee DFA investment advisors Also lots of pseudo-celebrity advisors are DFA associated: Rick Ferri, Larry Swedroe, Eric Haas, Paul Merriman, Jeff Troutner, Steve Evanson, Scott Burns, etc, etc.

I looked at the fees on their funds and they look to be nice and low. So the only issue is that you have to go through an advisor to get them.

[Sarah in SC]

Yes, DFA funds are usually sold only through advisors.
I think if you do a search on the forum there is some good info on the funds, you might also PM Finance Dude--he, I believe, knows more about them.

[nun]

Quote:

Originally Posted by Sarah in SC Yes, DFA funds are usually sold only through advisors. I think if you do a search on the forum there is some good info on the funds, you might also PM Finance Dude--he, I believe, knows more about them.

What I can't figure is why you'd go to an advisor to buy essentially index funds from DFA. They seem to be a company that has low cost "indexy type" funds so why would you need to pay an advisor, just go to Vanguard, Fidelity etc. Am I missing something?

[Sarah in SC]

The company itself has chosen to market themselves to only be available through advisors of their choosing.

Just like Dodge and Cox prefers that you buy and hold their funds at the fund company. This is why you get charged a transaction fee on Dodge & Cox when you buy it at a broker.

[nun]

Quote:

Originally Posted by Sarah in SC The company itself has chosen to market themselves to only be available through advisors of their choosing. Just like Dodge and Cox prefers that you buy and hold their funds at the fund company. This is why you get charged a transaction fee on Dodge & Cox when you buy it at a broker.

Yes, but what's the advantage. They're selling something that you can get for free. A little reading of this forum and most folks can go off to Vanguard and set up a low cost balanced index fun portfolio. What value added does DFA deliver?

[LOL!]

Quote:

Originally Posted by nun Yes, but what's the advantage. They're selling something that you can get for free. A little reading of this forum and most folks can go off to Vanguard and set up a low cost balanced index fun portfolio. What value added does DFA deliver?

I believe your assertion is false. "most folks" cannot "go off to Vanguard and set up a low cost balanced index fun (sic) portfolio." I believe most folks are essentially clueless. Also many folks do not wish to figure out how to do tax loss harvesting and rebalancing. Just look at all the questions we get on this forum about which funds to choose, how to do an asset allocation, which accounts to use for which asset classes, how to TLH and how to rebalance. That is proof enough that most folks can't do this.

[nun]

Quote:

Originally Posted by LOL! I believe your assertion is false. "most folks" cannot "go off to Vanguard and set up a low cost balanced index fun (sic) portfolio." I believe most folks are essentially clueless.

I cannot argue with that, but reading this forum would give them some smarts. Seriously how difficult is the accumulation phase really. Max out that 401k, shove it into a low expense target retirement fund and wait for indexing, compound interest and asset allocation to work their magic. After tax savings is a bit more difficult, but not much, use a Life Strategy fund or balanced fund that is appropriate for your risk tolerance.

Where things get tricky is in the income/payout phase and there I can see a financial advisor being of some use. But I still don't get what advantage DFA offers? Why would an advisor who's truly independent and working for you point you in their direction rather than Vanguard?

[LOL!]

OK, nun ... how successful have you been implementing your investment policy statement? Do you see how putting a Life Strategy or balanced fund in a taxable account is a poor choice and will hurt you on taxes? Do you see how a Vanguard target retirement fund is lacking the real estate asset class and is not tilted to small cap and not tilted to value like a DFA portfolio would be?

Now I agree that one can duplicate a DFA-style portfolio by using ETFs and without going to an advisor, but it will cost one some time in reading, learning and implementing. If it only cost $3000 a year to have someone do all that for you on a million dollar portfolio, then that might be worth it to you. If it cost you $3000 out of a $300,000 portfolio, then it might not be worth it.

[Nords]

Quote:

Originally Posted by nun I cannot argue with that...

It doesn't seem to be stopping you!

Quote:

Originally Posted by nun ... but reading this forum would give them some smarts. Seriously how difficult is the accumulation phase really. Max out that 401k, shove it into a low expense target retirement fund and wait for indexing, compound interest and asset allocation to work their magic. After tax savings is a bit more difficult, but not much, use a Life Strategy fund or balanced fund that is appropriate for your risk tolerance.

Using that logic I'd be at my ideal weight with six-pack abdominal muscles like Brad Pitt. I'd be richer, speak six languages, and play a mean rock guitar too.

Quote:

Originally Posted by nun But I still don't get what advantage DFA offers? Why would an advisor who's truly independent and working for you point you in their direction rather than Vanguard?

One advantage DFA offers is index replication with decile slices such as micro-caps. That advantage admittedly may be narrowing today, but DFA can replicate the smallest decile of market cap with purchasing power that drives down the bid/ask spreads. Their index costs (reconstituting & rebalancing)are much lower than we retail investors would pay.

I think that DFA's biggest advantage is a disciplined investing system that's sadly lacking by most advisors, let alone their customers. For their fee, DFA is willing to do the abdominal exercises so that we don't have to.

But, hey, you don't have to argue. Go get their performance data, make up your own portfolio, and compare the results after 5-10 years.

[nun]

Quote:

Originally Posted by LOL! Do you see how putting a Life Strategy or balanced fund in a taxable account is a poor choice and will hurt you on taxes? Do you see how a Vanguard target retirement fund is lacking the real estate asset class and is not tilted to small cap and not tilted to value like a DFA portfolio would be? ....... If it only cost $3000 a year to have someone do all that for you on a million dollar portfolio, then that might be worth it to you. If it cost you $3000 out of a $300,000 portfolio, then it might not be worth it.

There are always going to be "better" ways to approach investing, heck, that's what the snake oil advisers sell. Sure you can always be more tax efficient and better diversified, but your response is why many people are put off investing; they get paralyzed by all the possibilities, choices and fear of doing the wrong thing. If you are starting out investing and in a low tax bracket a balanced fund might be just the thing. If you're worried about tax then a tax managed balanced fund might be better or just go with an equity index fund, but maybe now you want some bonds too.....the most important thing is to save regularly in low cost funds with an AA that let's you sleep at night. The biggest gain you have is the penny saved and not spent!

I'm currently buying target retirement 2025 funds in my 457 and 403b accounts with 0.23% expense ratios, CREF Global equities, Equity Index, TIAA Real Estate, and Bond Market in my college retirement plan with 0.5% expenses, VTSMX, VTGSX and VBMFX in my ROTH, and after tax I'm buying VTSMX, VTGSX and Prime MM for some liquidity.

If you had a million dollars the cost would likely be closer to $10k (assuming 1% fee), but for the smaller investor a simple strategy with Vanguard/Fidelity etc is probably better.

[unclemick]

Appropriate Target Retirement, no 2 pencil, and some big handgrenades.

ok so no handgrenades - but I do know where and how far to drive to buy fireworks on the 4th.

And I only use the no 2 pencil for my Norwegian widow stocks as part of the treatment for my hormonal disease.

Successful investing is so screamingly simple, most people refuse to believe it.

In a rational world I would be billing FA's for the priveledge of wasting my time/talking to me.

heh heh heh - Lest I forget - pssst Wellesley! A little investing humor.

[nun]

Quote:

Originally Posted by Nords One advantage DFA offers is index replication with decile slices such as micro-caps.

Not sure I see this as an advantage, for me the broader the better.

[FinanceDude]

Quote:

Originally Posted by nun I looked at the fees on their funds and they look to be nice and low. So the only issue is that you have to go through an advisor to get them.

DFA uses a different indexing strategy than Vanguard. DFA doesn't limit what an advisor can charge, so there are high fee DFA advisors and low fee DFA advisors.

I guess in a nutshell, it allows more "slicing and dicing" of asset classes than standard indexing does, i.e., you don't buy the WHOLE index, but layers of an index.

DFA has made a business decision NOT to offer them directly to comsumers. They feel that if you want to do your own thing, go to Vanguard, if you want them, you need to go through an advisor.

[unclemick]

Quote:

Originally Posted by FinanceDude DFA uses a different indexing strategy than Vanguard. DFA doesn't limit what an advisor can charge, so there are high fee DFA advisors and low fee DFA advisors. I guess in a nutshell, it allows more "slicing and dicing" of asset classes than standard indexing does, i.e., you don't buy the WHOLE index, but layers of an index. DFA has made a business decision NOT to offer them directly to comsumers. They feel that if you want to do your own thing, go to Vanguard, if you want them, you need to go through an advisor.

Good summary - kinda follows my thinking. My slice and dice phase came and went - the basis of all kinds of multi asset class portfolio's which DFA originally made it easier to construct(in certain asset classes).

I didn't fully throw in the towel til I finally finally got what Bogle was driving at - looking at my 28% plus turnover in my small cap index fund.

Went Target 2015 in 2006 but even they have done some 'adjusting' in perfect timing for the recent unpleasantness. .

heh heh heh - nobody's perfect. .

[nun]

Quote:

Originally Posted by unclemick I didn't fully throw in the towel til I finally finally got what Bogle was driving at - looking at my 28% plus turnover in my small cap index fund. Went Target 2015 in 2006 but even they have done some 'adjusting' in perfect timing for the recent unpleasantness. . heh heh heh - nobody's perfect. .

The insistence on having the right amounts of real estate, small cap and squeezing every last cent of tax efficiency from a portfolio sort of misses the point as far as I'm concerned, the point being to actually start investing and doing a Boglish sort of thing. Hence, I wouldn't pay to get access to DFA.

My Mum is a great example of simple investing principles producing good returns. Maybe not maximum returns, but she met her objectives. She wouldn't know a micro-cap from a market decile, but she understood that if she saved every week into a saving account and paid off the mortgage she'd be doing well. And she has done well, 60 years of high interest bank account saving surely isn't the most tax efficient strategy, but she's very comfortable and still puts money aside every week.

[unclemick]

One more thought - DFA are no slouches - they recognized that once you slice an index 'too thin' then one encounters a lot of turnover due to stocks moving in and out index boundaries incurring more trading costs.

So I think they made the edges of some of their indexes squishy(tech talk) to damp trading costs a tad.

heh heh heh -

[Nords]

Quote:

Originally Posted by nun Not sure I see this as an advantage, for me the broader the better.

Well then in your case you'd buy all ten deciles.

You're repeating the classic reciprocated diatribe debate of "total market" vs "slice & dice" investing. Each group of diehards have their advantages and drawbacks.

There are many roads to one's investing goals, and arguing about the route frequently hinders the actual progress. If you're happy with what you're doing then that's what you should do.

DFA is a credible group with successes of their own whose approach has worked for other people... who would probably not prefer your strategy. They certainly offer a better alternative to high-fee financial advisors and highly-active management styles.

[bluejeansman]

Nun,

I think DFA vs do-it-yourself index funds deserves lot more research rather than just tossing it away. I have done a bit of research and it looks DFA might be slightly better. Please hear me out ...Just do a DFA vs Vanguard in google and there are some very interesting posts with data and facts. Of course people will be quick to point out that past performance is not indicative of future results but that is true with everything. Maybe cash will outperform stocks and bonds over next 50 years. So lets keep that caveats aside and look at (mostly) past data. I will also try to give some causal reasons below. I dont own any DFA funds but I am intrigued.

Many notable fee-only financial planners , including those who post on bogleheads seem to like DFA. Of course we can be skeptical and quickly dismiss it as : "They stand to gain the 1% fee so its just self interest". Maybe thats true, but there is more to it. Please read on ...

Suppose you want exposure to equities : The issue comes down to whether you want to keep a simple "total stock market index fund" vs "slice and dice". I tried to raise this in my asset allocation paralysis thread on bogleheads and also in my "getting equities right" bogleheads thread and most people opined that "it doesnt matter" or and "your stocks/bonds AA is the most important". But just ignoring things which seem complicated to us is not the scientific thing to do. Based on the research I am doing, it appears that slice-and-dice may provide better returns.

Perhaps over a 50 year period, it wont matter and VFINX(S&P 500) or VTSMX(Total stock market) might have the same return as slice/dice, but most investors' time horizons are about 25 years or so, during which a slice-n-dice may offer less risk and possibly higher return.

Have you read Paul Merriman's Ultimate Buy and hold article ? You can read it at FundAdvice.com - Home. It is well written and makes a lot sense. Statistics and finance theory proves that slice and dice is most likely better than owning the whole lot, assuming you can stick to the AA discipline. This is simply because if you have a bunch of uncorelated assets, you can slightly minimize the risk and get slightly better return. Take the Vanguard Total Stock Market Fund, this is mostly large-cap. It has got only 9% or so in small-cap. In this article : Slice and dice or TSM? My Message, Rick Ferri has clearly shown that slice-and-dice is mathematically better provided you can stick to the asset allocation. See also : FundAdvice.com - Where's the "Total" in the Total Stock Market Fund?. Now you may argue that it is hard to find uncorelated assets, and you may have a point, but if you split your portfolio as Large/Small-Cap Growth/Value (2x2) and do the same for International and do the same for emerging, you WILL end up with a few uncorrelated asset classes and that will be to your advantage.

So once you decide that slice and dice is what you want, then the question is : Who provides index funds for every single asset class you can think of ? DFA does and Vanguard does not. In FundAdvice.com - The best mutual funds: DFA or Vanguard?, Vanguard's international small-cap fund is closed to new investors and Vanguard does not have an International Small Cap Value fund. so you are not getting exposure to these asset classes.

Paul Merriman's article above as well as http://www.econ.duke.edu/Papers/PDF/...0july_2007.pdf Masters thesis shows that DFA outperforms Vanguard by about 2 to 3 percentage points simply because of their precise asset allocation.

DFA funds are NOT like actively managed funds doing day trading and creating huge turnover costs and trying to outperform the market. Nobody here is trying outperform the market. DFA is the brain child of Eugene Fama, Prrofessor Extraordinaire at Univ of Chicago, the father of modern portfolio theory which holds that you cant beat the market so caputure the whole market. So it is the same idea as index funds, but done in a more precise way to capture every single asset class you can get. Also, index funds slavishly follow the index, and if made available to every Tom Dick and Harry who wants to "get out of the market" on a whim which will cause huge turnover. This is why DFA dont advertise and provide access to every day trader out there. This should result in low turnover.

Having said that the question is whether it is worth paying the 1% fee that many advisors charge. I am in Europe and it looks like the fees may be higher here, especially for smaller portfolios and I am not so sure if it is worth paying 2%. But Americans always get good prices and at 1% I would be tempted. Of course if Vanguard offered index funds in the 2 asset classes I pointed out above, I might stick with Vanguard and use Paul Merriman's ultimate buy and hold portfolio.

Since I myself have not yet decided whether to use low cost ETFs/Vanguard or pay for DFA, I would be willing to explore this further with anyone interested.

If you have a large amount of money to invest the DFA advisory fees seem to come down even more, and at that point (0.5% of assets) it seems to add value.