Thank you SO much for that informative post... I am sold on passivity and
the Fama/French models... I suppose I was indeed looking for an outside
viewpoint... I am comfortable with my advisor, but its always nice to hear
other points of view... thanks so much for the thoughtful response

Andrew

"Tad Borek" <borekfm[at]pacbell.net> wrote in message
news:siq%b.17397$046.1362[at]newssvr29.news.prodigy.com...
- quote -

Andrew W wrote:
- quote -

[This may mirror what you've heard already - I'm a fee-only advisor that
uses DFA funds - but perhaps hearing from an advisor other than your own
would be helpful...]

First off, it's important that you're sold on the concept of passively
managed mutual funds, where you focus on the mix of asset classes rather
than attempting to find a fund manager who can do something better and
different. I think everything falls into place a lot easier once you've
turned the corner on that concept. Otherwise you may find yourself
comparing the passive funds chosen for you to everything else out there,
and second guessing things based on shorter-term performance. And of
course, there will always be funds that are doing better, that's not the
point. The passive plan pays off best if you stick with the strategy
rather than revisiting the whole concept from time to time.

Next, it would be helpful if you buy into the Fama-French models for
risk and return. It's not essential that you study those in-depth -
that's what your advisor is for really. But a basic familiarity with the
acadamia behind passive funds and indices does inform some investment
decisions.

And if you are putting together that kind of portfolio, DFA has some
funds that I consider "best in class". Some are unique, others are
created using criteria that are different from (and I think better than)
the comparable ones from Vanguard/iShares/etc. The quick way to put it
is that certain DFA funds seem to do the best job of isolating the
Fama-French risk factors, both for US and international securities.
Subjective decision, of course.

I don't use DFA funds for everything. For example I think if you want a
broad-market fund as a core holding there are plenty of other
alternatives out there. These are minor differences though and from a
cost perspective DFA is typically competitive if not among the lowest in
the category. Factor in transaction costs, it can be an issue (not just
with initial purchases, also with rebalancing). The exact costs will
depend on your advisor's custodian and your advisory agreement.

As for the specific question of how they've done vs. Vanguard - that's
hard to say really. I could cite specific funds that have
outperformed/not but that kind of info is readily available, and it
might miss the point - because of the way some of the funds differ you
probably wouldn't have identical allocations to the Vanguard & the DFA
fund. The way I describe it to clients is that I expect a portfolio
including DFA's funds to provide a marginal benefit, because I think
they do a better job of representing certain asset classes, rewarding
the risk you take on a bit better. They seem to have some competitive
advantages in running their small-stock funds. In some categories there
isn't a comparable offering from Vanguard. At the same time, it's not
necessary to have every asset class represented in an account to do
well. You could go all-Vanguard and do perfectly well.

When I have my druthers (when it's an account I manage on an ongoing
basis rather than a self-directed account where DFA funds aren't
accessible), I use DFA funds almost exclusively in several of the fund
categories. In Vanguard-focused recommendations I'll substitute where
possible, but leave out a couple (or change the allocation) where the
Vanguard offering looks substantially different.

One factor that some clients care about is that when you use DFA funds,
you need to work through a DFA-approved advisor. So if you ever decide
to go the self-directed route you might be limited to holding the funds
you have at the time you detach - typically all you can do is let
dividends reinvest and place sell orders. If you change advisors and
want to keep using the funds, you'd need to find a DFA-approved advisor.
This may vary by custodian though, so if it's a concern - discuss it
w/your advisor.

-Tad

On Thu, 26 Feb 2004 09:03:45 CST, "Andrew W"
<andrewsfcaREMOVE[at]yahoo.com> wrote:

- quote -

It depends on how much they charge, whether those charges in addition
to fund charges, and what you hope to accomplish by hiring this
person?
You'll get more thorough responses if you answer those questions.

-HW "Skip" Weldon
Columbia, SC

Thanks again for all of the posts regarding my inheiritance question... am
now considering converting the stock into a Dimensional Fund Advisor (DFA)
portfolio administered by a fee only planner... anyone have opinions about
how well these have actually done for them? Or how they stack up to
traditional indexes a la Vanguard? They certainly have the academics and
numbers behind them but I havent spoken with anyone who actually holds
them... thanks for any thoughts

Andrew W