Dimensional Fund Philosophy – Portfolio Management
Prudent investing is a rational process. It involves deciding how much risk to take, then choosing asset classes to match an investor’s preferred risk-return tradeoff. We manage a broad range of strategies to meet the needs of investors with diverse investment goals.
Dimensional manages strategies with these core beliefs in mind: Securities are fairly priced in liquid and competitive markets, diversification is essential, and investing involves trading off risks and costs with expected returns. These time-tested principles have guided our approach for more than three decades. By focusing on what matters, Dimensional focuses your efforts.
Dimensional structures strategies based on academic research rather than on speculation or commercial indexes. Small cap strategies target smaller stocks more consistently. Value strategies target value returns with greater focus. As a result, investors can achieve more consistent portfolio structure.
|Believes that, in liquid markets, prices reflect all available information||Attempts to identify mispricing in securities on a consistent basis||Allows commercial benchmarks to define strategy|
|Focuses strategies on the dimensions of higher expected returns||Often relies on forecasting techniques to pick securities and/or time markets||Tethered to a benchmark, reducing flexibility|
|Seeks to add value through portfolio design and implementation||Generates higher expenses, trading costs, and excess risk||Accepts lower returns and increased trading costs in favor of tracking|