DFA Reduces Cost Of Mutual Funds

Dimensional Fund Advisors (DFA) announced they are cutting costs on seventy-seven of their mutual funds beginning February 28th.  This represents an average management fee reduction of 8% on their funds, which are already considered low cost when compared to their industry peers. Any reduction in the cost of the mutual funds we use means that you, the investor, get to keep more of the returns earned by the fund.  We have long advocated for using low cost, tax efficient funds to implement our portfolios.  Morningstar, an independent mutual fund rating firm, has concluded in their own study that the cost of a mutual fund is one of the best predictors of the fund’s ability to perform well relative to its peers. Naturally, we ran a quick calculation to try and estimate how much we expect the annual savings will be for our portfolios.  We determined that the average cost of our 60%...

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Coronavirus: Short Term vs Long Term

The headlines have been dominated recently by the spread of the coronavirus and confirmation of over 80,000 global cases.  The stock market has taken notice, and as of this writing, markets have declined approximately 11% from their recent highs last week.  Meanwhile, the bond market has rallied strongly as investors flock to safer investments. Undoubtedly, this outbreak has caused many people to become fearful about what might happen to the stock market and global economy going forward.  We certainly are no experts in health care or medicine so we will save everyone from having to hear our opinion about how the coronavirus situation may play out. What we can do, however, is provide perspective on how past outbreaks have affected markets and what investors should keep in mind as the markets fluctuate.  According to First Trust, during the last forty years there have been twelve major outbreaks.  During those events, the average...

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The Difference Between Tax Preparation and Tax Planning

In the first quarter of each year, much of America turns their attention to filing tax returns. It’s not something we relish, but necessary to comply with the tax code.  So this year, while you are forced to think about taxes and perhaps have all the important documents in front of you, make a decision to also do some tax planning. So what’s the difference between tax preparation and tax planning?  That is an important distinction.  Tax preparation requires us to look back upon the past year and provide an accounting to the IRS about the amount of tax we owe.  While your tax preparer will use every technique to minimize this amount, the opportunities to improve your tax picture for the past year are somewhat limited. Conversely, tax planning is forward looking to the coming tax year and beyond.  It’s quite understandable that your tax preparer may not be in a...

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DFA and Vanguard Named to Best Parent Fund Companies List

Morningstar, an independent mutual fund rating company, recently updated their parent ratings on mutual fund companies.  The two primary mutual fund companies we use, Dimensional Fund Advisors (DFA) and Vanguard, were both given a high rating, the top rating available by Morningstar.  Only five total mutual fund companies, of which more than 50 were rated, received the top rating of high. Morningstar reviewed fund companies from several angles such as culture, long-term focus, ownership structure, manager tenure, regulatory infractions and ethical practices, and providing strategies that have served investors well. When speaking about Vanguard, Morningstar’s Alec Lucas said “Vanguard gained its stature by following Jack Bogle's playbook: pairing relatively predictable strategies, both passive and active, with minimal costs. That's enriched Vanguard's investors, and those outside its flock who have benefited from industrywide fee compression.” Daniel Sotiroff wrote about DFA; “Dimensional Fund Advisors continues to be an outstanding steward of its shareholders' capital. …...

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