Comments on: Dimensional Fund Advisors Part IX http://wheredoesallmymoneygo.com/dimensional-fund-advisors-part-ix/ A personal finance blog written by Preet Banerjee Wed, 23 May 2012 05:38:46 +0000 hourly 1 http://wordpress.org/?v=3.1.2 By: Dimensional Fund Advisors Part VIII | WhereDoesAllMyMoneyGo.com http://wheredoesallmymoneygo.com/dimensional-fund-advisors-part-ix/#comment-12140 Dimensional Fund Advisors Part VIII | WhereDoesAllMyMoneyGo.com Sun, 18 Mar 2012 03:13:31 +0000 http://www.wheredoesallmymoneygo.com/?p=804#comment-12140 [...] CLICK HERE TO GO TO PART IX [...] [...] CLICK HERE TO GO TO PART IX [...]

]]> By: Preet http://wheredoesallmymoneygo.com/dimensional-fund-advisors-part-ix/#comment-1029 Preet Fri, 05 Sep 2008 23:21:35 +0000 http://www.wheredoesallmymoneygo.com/?p=804#comment-1029 @Patrick - I wouldn't be too hasty on that! While the chart <a href="http://finance.google.ca/finance?chdnp=0&chdd=0&chds=0&chdv=1&chvs=Linear&chdeh=0&chdet=1220656612952&chddm=719882&cmpto=AMEX:VTI;INDEXSP:.INX&cmptzos=-18000;-18000&q=AMEX:IJS&ntsp=0" rel="nofollow">looks good</a> it is worth noting that there can be very long periods of underperformance. You'll note that in a previous blog post, it was indicated that the equity premium takes maybe over 30 years to reliably show up with statistical confidence - same sort of story with small and value. You can "tilt" towards small and value to differing degrees with DFA instead of going all out - but it won't be apparent until later the effects of momentum on small cap mandates which can be crippling if they aren't 'immunized' - which you can't get with regular index tracking ETFs. @Patrick – I wouldn’t be too hasty on that! While the chart looks good it is worth noting that there can be very long periods of underperformance. You’ll note that in a previous blog post, it was indicated that the equity premium takes maybe over 30 years to reliably show up with statistical confidence – same sort of story with small and value. You can “tilt” towards small and value to differing degrees with DFA instead of going all out – but it won’t be apparent until later the effects of momentum on small cap mandates which can be crippling if they aren’t ‘immunized’ – which you can’t get with regular index tracking ETFs.

]]> By: Patrick http://wheredoesallmymoneygo.com/dimensional-fund-advisors-part-ix/#comment-1028 Patrick Fri, 05 Sep 2008 18:17:20 +0000 http://www.wheredoesallmymoneygo.com/?p=804#comment-1028 I wonder if my pension should be invested in IJS... I wonder if my pension should be invested in IJS…

]]> By: Michael James http://wheredoesallmymoneygo.com/dimensional-fund-advisors-part-ix/#comment-1027 Michael James Thu, 04 Sep 2008 16:08:15 +0000 http://www.wheredoesallmymoneygo.com/?p=804#comment-1027 Preet: Thanks for the link. For anyone who wants to work out compound returns from average returns, the difference is roughly half the standard deviation squared. So, an average return of 12% with a 20% standard deviation gives a compound return of 10% (0.12-(1/2)(.2)*(.2)=0.10). Preet: Thanks for the link. For anyone who wants to work out compound returns from average returns, the difference is roughly half the standard deviation squared. So, an average return of 12% with a 20% standard deviation gives a compound return of 10% (0.12-(1/2)(.2)*(.2)=0.10).

]]> By: Preet http://wheredoesallmymoneygo.com/dimensional-fund-advisors-part-ix/#comment-1026 Preet Thu, 04 Sep 2008 13:36:34 +0000 http://www.wheredoesallmymoneygo.com/?p=804#comment-1026 @Patrick - To be clear - the data in this post is not a fund's performance, but rather is the back-tested performance of a certain criteria of market constituents. In the case you are referring to: Small stocks with high BtMs. The stocks that fit this criteria could be weighted by a fund on an equal weight basis, or on a market capitalization basis or any other way. While I'm still trying to find out if these data are market-cap or equal weighted, I see your point about the irony! :) @Patrick – To be clear – the data in this post is not a fund’s performance, but rather is the back-tested performance of a certain criteria of market constituents. In the case you are referring to: Small stocks with high BtMs. The stocks that fit this criteria could be weighted by a fund on an equal weight basis, or on a market capitalization basis or any other way. While I’m still trying to find out if these data are market-cap or equal weighted, I see your point about the irony! :)

]]> By: Patrick http://wheredoesallmymoneygo.com/dimensional-fund-advisors-part-ix/#comment-1025 Patrick Thu, 04 Sep 2008 13:18:57 +0000 http://www.wheredoesallmymoneygo.com/?p=804#comment-1025 @Preet - seems slightly ironic that a fund targeting small-cap stocks would be market cap-weighted. :-) @Preet – seems slightly ironic that a fund targeting small-cap stocks would be market cap-weighted. :-)

]]> By: Preet http://wheredoesallmymoneygo.com/dimensional-fund-advisors-part-ix/#comment-1024 Preet Thu, 04 Sep 2008 13:15:18 +0000 http://www.wheredoesallmymoneygo.com/?p=804#comment-1024 @Patrick - actually I believe it is based on market cap within those parameters and not equal dollar amounts. I'll try to get clarification on that. But otherwise, if you could invest in such an index with no costs or taxes, then yes you are correct about the growth. Rebalancing was annual. @Patrick – actually I believe it is based on market cap within those parameters and not equal dollar amounts. I’ll try to get clarification on that. But otherwise, if you could invest in such an index with no costs or taxes, then yes you are correct about the growth. Rebalancing was annual.

]]> By: Patrick http://wheredoesallmymoneygo.com/dimensional-fund-advisors-part-ix/#comment-1023 Patrick Thu, 04 Sep 2008 04:00:19 +0000 http://www.wheredoesallmymoneygo.com/?p=804#comment-1023 Hi Preet, This is fascinating. Let me see if I understand the 14.03% annualized compound return of the "Small Value" index: you start in January 1927 by investing equal dollar amounts in each of the companies with both low market caps and high BtM ratios. At the end of the year, you rebalance your holdings so again you have an equal dollar amount in each company that qualifies as of January 1928, and repeat until the end of 2007. At the end of 2007, you'd find your investment has grown by a factor of 1.1403^80. Is that right? Hi Preet,

This is fascinating. Let me see if I understand the 14.03% annualized compound return of the “Small Value” index: you start in January 1927 by investing equal dollar amounts in each of the companies with both low market caps and high BtM ratios. At the end of the year, you rebalance your holdings so again you have an equal dollar amount in each company that qualifies as of January 1928, and repeat until the end of 2007. At the end of 2007, you’d find your investment has grown by a factor of 1.1403^80. Is that right?

]]> By: Dimensional Fund Advisors Part VIII : WhereDoesAllMyMoneyGo.com http://wheredoesallmymoneygo.com/dimensional-fund-advisors-part-ix/#comment-1022 Dimensional Fund Advisors Part VIII : WhereDoesAllMyMoneyGo.com Thu, 04 Sep 2008 02:49:27 +0000 http://www.wheredoesallmymoneygo.com/?p=804#comment-1022 [...] CLICK HERE TO GO TO PART IX Share and Enjoy: [...] [...] CLICK HERE TO GO TO PART IX Share and Enjoy: [...]

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