Investment
Investment Management Strategy
Don't Try to Outguess the Market
The markets pricing power works against mutual fund managers who try to outperform through stock picking or market timing. As evidence, only 19% of the US-based equity mutual funds and 11% of fixed income funds have survived and outperformed their benchmarks over the past 20 years.
US-Based Mutual Fund Performance, 2001-2020
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 cash flows. Investors can use the information to pursue higher expected returns in their portfolios.
EQUITIES
FIXED INCOME
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.
Home Market Index Portfolio
Global Market Index Portfolio
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
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.
Growth of a Dollar, 1926-2020 (compounded monthly)
After We Meet, You'll Be Able To
Know your ability to assume investment risk given how much you plan to save and spend from your portfolio.
Find the right balance between return and risk that maximizes the likelihood of funding your desired lifestyle.
Understand what you’re invested in and how to be successful.
Don't Try to Outguess the Market exhibit: The sample includes funds at the beginning of the 20-year period ending December 31, 2020. Each fund is evaluated relative to its primary prospectus benchmark. Survivors are funds that had returns for every month in the sample period. Winners are funds that survived and outperformed their benchmark over the period. Where the full series of primary prospectus benchmark returns is unavailable, non-Dimensional funds are instead evaluated relative to their Morningstar category index.
Consider the Drivers of Returns exhibit: Relative price is measured by the price-to-book ratio; value stocks are those with lower price-to-book ratios. Profitability is measured as operating income before depreciation and amortization minus interest expense scaled by book.
Practice Smart Diversification exhibit: Number of holdings and countries for the S&P 500 Index and MSCI ACWI (All Country World Index) Investable Market Index (IMI) as of December 31, 2020. S&P data © 2021 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. MSCI data © MSCI 2021, all rights reserved. International investing involves special risks, such as currency fluctuation and political instability. Investing in emerging markets may accentuate these risks.
Avoid Market Timing exhibit: In USD. US Large Cap is the S&P 500 Index. US Large Cap Value is the Russell 1000 Value Index. US Small Cap is the Russell 2000 Index. US Small Cap Value is the Russell 2000 Value Index. US Real Estate is the Dow Jones US Select REIT Index. International Large Cap Value is the MSCI World ex USA Value Index (gross dividends). International Small Cap Value is the MSCI World ex USA Small Cap Value Index (gross dividends). Emerging Markets is the MSCI Emerging Markets Index (gross dividends). Five-Year US Government Fixed is the Bloomberg Barclays US TIPS Index 1–5 Years. S&P and Dow Jones data © 2021 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. MSCI data © MSCI 2021, all rights reserved. Bloomberg Barclays data provided by Bloomberg. Chart is for illustrative purposes only.”
Let Markets Work for You exhibit: In USD. US Small Cap is the CRSP 6–10 Index. US Large Cap is the S&P 500 Index. US Long-Term Government Bonds is the IA SBBI US LT Govt TR USD. US Treasury Bills is the IA SBBI US 30 Day TBill TR USD. US Inflation is measured as changes in the US Consumer Price Index. CRSP data is provided by the Center for Research in Security Prices, University of Chicago. S&P data © 2021 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. US long-term government bonds and Treasury bills data provided by Ibbotson Associates via Morningstar Direct. US Consumer Price Index data is provided by the US Department of Labor Bureau of Labor Statistics.]