Total Wealth Planning’s investment approach and philosophy is one that tunes out the noise and focuses on providing predictability for a client’s goal “funding vehicle.” Our approach involves keeping fund costs low, tax efficiency, and structuring a portfolio to gain risk mitigation benefits from diversification and compound growth benefits from continuous monitoring and opportunistic rebalancing.
Dimensional Fund Advisors (“DFA Funds”) represent a main staple in our client portfolios because of their ability to achieve these goals better than others. Recently, an investment committee member and Nobel laureate Eugene Fama said, “There’s one robust new idea in finance that has investment implications maybe every 10 or 15 years, but there’s a marketing idea every week.” Recently, the marketing whizzes have been working their magic. For example, new investment vehicles have been created to attract attention and hopeful investors to leverage “Work from Home,” “Treatments, Testing and Advancements,” “Cannibis,” or others.
When selecting strategies for their portfolios, investors are often tempted to seek out the latest and greatest investment opportunities. But long-term investors should be aware that letting short-term themes influence their investment approach may be counterproductive. While only time will tell how these reactionary investments play out, investors need to realize that these investment fads are nothing new.
It is important to remember that many investing fads, and indeed, most investment vehicles, do not stand the test of time. A large proportion of funds fail to survive over the longer term. Based on data from Dimensional’s 2020 Mutual Fund Study, of the 2,992 equity mutual funds around 15 years ago, only 52% still existed at the end of 2019. Similarly, among fixed income mutual funds, only 55% of the 1,658 funds available to US-based investors at the beginning of 2005 are still around today. Compare this to Dimensional, of the 31 funds that were around 15 years ago, 100% of those funds are still in existence today.
Dimensional avoids chasing the shiny object. When we bring something new to the market, it’s about helping clients pursue their goals through investment solutions that are backed by robust research.
Fashionable investment approaches will come and go, but investors should remember that a long-term, disciplined investment approach based on research and implementation may be the most reliable path to success in the global capital markets.