Why are you such big fans of index funds?

If you compare the Fidelity Low Price Stock Fund to Vanguard’s small-cap and mid-cap index funds, you will see Fidelity’s three-year, five-year and 10-year performance leaves the index funds in the dust. Fidelity’s fund is a small to midcap blend fund. If it’s so easy to find funds that do much better than index funds, why do you recommend index funds? If actively managed funds make you more money in the end, you’d be better off rather than worrying so much about expense ratios and turnover. Please answer my question. I am getting different answers from every advisor.


The debate between active and passive management has been going on for decades and will probably continue to do so. In the end, you must decide for yourself what to believe and what to do. I’ll give you my perspective plus some resources that show you why we believe in passive management.

What you have done is very easy. You have looked at the past and determined what you should have invested in, at least in this category of assets. If investing were that simple, everybody would do it, and we’d all be wealthy. The problem is you cannot invest in any past track record. (more…)

Splitting Portfolio between DFA and Vanguard

I currently have allocated my retirement funds to your Vanguard buy and hold strategy as listed on your website. I have half of the allocation in DFA Funds as I noticed  that some of the Vanguard Funds have performed better over the 5 year period as compared to the DFA ones so that is why I have a combination of the 2 fund families making up the entire suggested investment plan.  I do pay a management fee for the whole portfolio though as all the assets are under the advisors care and maintenance. In your opinion is this a winning strategy to invest in the best performing asset classes from each fund family?

This is a very good question, one which in one way or another is on the minds of many investors these days.

I think the core question you are asking is something like this: Once I have figured out the asset classes I want, shouldn’t I use the funds in those asset classes that have performed best over the past five years?

You are implying two other questions:

  1. Which is better, Vanguard or DFA?
  2. Why has DFA underperformed Vanguard in several asset classes over the past few years?

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