Retiring is an emotional event, and most people struggle with the transition from earning and saving, to relying on their investments to supplement their Social Security. One of the biggest risks to a successful retirement is investing too conservatively. Watching account balances go down is never fun, and usually very stressful for retirees.
Have you heard of Dimensional Fund Advisors (DFA)? Let’s look at how these excellent mutual funds could enhance your retirement goals and why most investors are not familiar with them.
DFA funds have a proven record of capturing attractive returns for long-term investors, which makes them a great fit for retirement accounts! Even if you recently retired, you would still need money 20 years from now and growth investments to help you keep pace with inflation.
DFA was founded to apply academic research, based on historical trends. Their investment practices are driven by market economists (including several Nobel Economic Laureates). They look to efficiently participate in the economic growth that drives stock prices higher.
Investment Strategies to Support your Future Goals
DFA funds are best suited to provide for longer-term goals. Their research shows that smaller companies and international stocks historically do better. Because they are more volatile, investors can capture bigger returns. Plus, desired returns are more predictable over longer periods of time.
If you keep some money “liquid” with little risk for next month and next year, you avoid short-term market risks to that money. Taking a modest risk for the intermediate-term will help earn reasonable yields. When these are in place, you can invest for the long term, ride out market downturns and participate in Dimensional Funds.
Setting a High Standard for Advisors
The reason that you may not know much about DFA is the company’s policies that restricts most advisors from trading their funds. They require education on their fundamentals and practices. They require monthly reporting of approved advisor’s activity in their funds.
Also, DFA does not share revenues with brokerage firms, which is a standard compensation component for most advisors, so most big firms avoid them. DFA doesn’t participate in the retail “mutual fund superstores” like Schwab or Vanguard, as they require fees to host funds on their platforms.
Very low internal expenses focus on the top performers, and long-term investments all contribute to the DFA story. Being invested across the entire “dimension” of an asset class, as opposed to a market-cap-weighted index also makes them unique and successful.
For more information on how Integras Partners employs DFA funds, click here!