You have read that I am a big fan of DFA (Dimensional Fund Advisors) mutual funds because of their diversification and low costs. The following is an interesting article from Kiplinger’s on DFA:
This Is Rocket Science
Academic ideas spawned one company’s great funds. But to get them, you must play by its rules.
By Bob Frick
From Kiplinger’s Personal Finance magazine, October 2008The story of dimensional fund advisors is unlike that of any other fund company. You can’t just buy shares. Rather, you must first observe a courtship ritual and then hire an adviser. And if you’re patient enough to listen and you agree with DFA that no one can beat the market, you’ll be allowed to own DFA funds. As DFA’s chief investment officer, Eduardo Repetto, puts it: “If we show you the data and you believe the data, then we are here to serve.”
Just like Saab’s claim that its cars are “born from jets,” DFA funds are born of eggheads. Nobel prize-winning economist Myron Scholes sits on DFA’s board, as does University of Chicago finance professor Eugene Fama — considered a shoo-in for a future Nobel award. Chief executive David Booth and director Rex Sinquefield, who co-founded DFA in 1981, were Fama disciples in college. “When I walk into a board meeting,” says Booth, “I don’t have to worry about being the smartest person in the room.”
The DFA philosophy boils down to the relationship between risk and return. History shows that …..
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