A stellar 2012 for DFA

The article “All in the Family” by Barron’s ranks mutual fund families across several asset classes and time periods. A stellar 2012 for the DFA Value Portfolio helped it earn first place for the US equity fund category. Its three year performance was also very respectable. DFA took 16th place overall for 2012 and 33rd for five-year performance. This article substantiates our use of DFA in client portfolios. The funds served clients well in the short term, but more importantly for the long term. Investing is, after all, a marathon, not a sprint.

We’ll say it again: The choice of assets can make a big difference.

There was an interesting article in the Wall Street Journal from March 8, 2011 called “Why Small-Cap Funds are Lagging.” It cites a study by Credit Suisse showing that “small-cap funds have increasingly been investing in companies larger than their category name would indicate—and the average fund is underperforming its benchmark.”

The article goes on to say “The average market capitalization of a company in a small-cap fund was about $3.1 billion at the end of 2010, compared to the average market cap of the benchmark Russell 2000 index of about $1.3 billion. The $1.8 billion gap between the two is the largest since September 2008.” (more…)

Barron’s chooses Dimensional Fund Advisors as “Best Mutual Fund Family” for 2010

Dimensional Fund Advisors (DFA) is the manager of all the equity mutual funds we recommend to our clients. In today’s issue of Barron’s, DFA was ranked the best for 2010 in a special report on “The Best Mutual Fund Families.” You can read the full article at Barron’s website, but here are some excerpts:

Dimensional Fund Advisors, whose quant[itative] funds operate almost like indexes, was in precisely the right markets and watched its pennies. (more…)

Recommended reading – NY Times: A Dying Banker’s Last Financial Instructions

Here’s what Mark Metcalf has to say about a recent article from the New York Times, “A Dying Banker’s Last Financial Instructions”, in which ex-Wall Street salesman Gordon Murray talks about a better way to invest:

Not only is this a powerful article about life, but it just happens to come with some top-notch investment advice.  While “The Investment Answer” differs slightly around the edges from Merriman’s investment approach, it is very much in line with our philosophy, and I would recommend it highly to anybody in search of a prudent way to invest.

Inflation and our Merriman bond portfolio

Here’s an article we recently mailed to Merriman clients, addressing some inflation questions that we felt our FundAdvice readers may also be interested in:

Some investors are concerned about the prospect of future inflation, based on fiscal and monetary measures the U.S. government has taken to respond to the recent market crisis. However, other metrics suggest that moderate inflation will continue. These include current inflation, bond market indicators and worldwide excess capacity.

Merriman’s recommended bond portfolio is structured to provide a reasonable level of protection against inflation.

The Fed’s view

The Federal Reserve, in a statement on April 28th said, “With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.”

Notwithstanding this reassuring if somewhat abstruse statement, there is considerable debate about whether higher inflation will result from the fiscal and monetary actions the federal government used to curtail the market plunge from October 2007 to March 2009. Inflation is the nemesis of bond investors. An increase in inflation will cause an increase in interest rates and decrease the value of bonds. Conversely, if interest rates were to fall because of lower inflation, bond prices would rise.

What factors impact inflation and how is our bond portfolio structured to handle inflation risk? (more…)