Dimensional Returns Win Again

I've been focusing on investment expenses lately because that's one of the easiest factors to control in managing your porfolio's overall return. Every day I talk to investors who are losing valuable investment dollars to unnecessary expenses. This post turns attention to the issue of overall portfolio return.

As most days, today began with a review of my clients' portfolio returns against relevant indexes. I also compared our portfolio returns to those earned by some of the popular active managers.

For example, today I ran an analysis comparing returns from Dimensional Funds portfolios to an investment in a Fisher Investments fund, Purisima Total Return (symbol PURIX). This Purisima fund's holdings tend to mirror the equities held in Fisher's privately managed accounts. You're probably familiar with Fisher Investments because they made a name for themselves by sending mass mailings directly to individual investors.

Results from today's analysis were consistent with what I see day in and day out. The Dimensional Funds portfolios delivered higher returns with a lower standard deviation versus PURIX in 10,5, and 3-year time periods. DFA clearly delivered more with less risk.

Specifically, for the 10 years May, 1998 - May 2008 PURIX achieved an average annual return of 7.42% while a comparable all equity portfolio of DFA funds returned 10.6%. That's a difference of 3.2% each and every year for the last 10 years.

For the 5 year period May, 2003 - May 2008 the annual return differential was a whopping 7.1% each and every year. In total, PURIX provided 93.4% over the time period while the comparable DFA portfolio returned 162.8%. For a $500,000 investment, that's a difference of almost $350,000!

These returns are net of all fees - including porfolio management fees charged by the advisors. Of course past performance is no guarantee of future performance.

Can you afford to give up 3-7% per year in your portfolio returns?
Do you have any idea how your investment return stacks up against a low-cost, diversified DFA portfolio?

If you answered "No" to either question, email me and I'll run your numbers. At no cost and no oblication to you, I'll provide a review of your specific portfolio and provide tips on how to get more return in your pocket.