Saltmarsh Partners with Dimensional for The Evolution of Investing

1/18/2017 - By Zachary Farrington

Saltmarsh Financial Advisors was honored to welcome Apollo D. Lupescu, PhD of Dimensional Fund Advisors (DFA) as a guest speaker for several special events in Pensacola and Tallahassee.

In his “Evolution of Investing” presentations, Dr. Lupescu described how those who drive the market have evolved from individuals with a mere interest and basic understanding of the market to highly-sophisticated, institutional investors with access to a variety of trading tools and research options.

As Dr. Lupescu explained, “The markets are no longer just competitive but are hyper-competitive.” Hunches, intuitions and friendly recommendations are no longer sustainable models of investing in today’s analytical and data-driven marketplace.

Lupescu went on to explain how DFA offers an alternative to the old-school approach to Wall Street of attempting to selectively pick high performing individual companies or time the market.  The founders of DFA pioneered the first index funds back in the 70’s but over the past 30 years the firm has attracted many great minds in academia, including numerous Nobel prize winning scientist, who have identified key dimensions of expected returns that have resulted in an improved investment experience for the client.  For example, in a typical portfolio of DFA funds, a client will own roughly 12,000 stocks in over 40 countries. Dr. Lupescu notes, “What would it take for all of those stocks to disappear at the same time?” Asset allocation drives returns and while the DFA approach provides for broad diversification, unlike Index funds which must mirror the index they track against, DFA has the flexibility to add or delete companies from their portfolios when fundamentals change.  Dr. Lupescu explains that “in managing how the list is created, maintained and traded, we can do better than the index.  For example, over 20 years in small-cap companies, we’ve added over one percent per year annualized return.  It’s not that we are better at picking the stocks, but we do better at managing the portfolio.”   

Importantly, Dr. Lupescu noted that while DFA builds and manages a variety of mutual funds, it is the relationship between the client and their advisor that ultimately drives success.  “The role of the advisor is to know their client and ensure they are invested based on their individual risk tolerance and goals and help them tune out the noise and stay the course.  Ultimately it is time in the market that determines success, not timing the market.”      

Saltmarsh Financial Advisors is proud to offer our clients a low-cost, tax-efficient and principled investment offering through our partnership with Dimensional Fund Advisors. To learn more about our investment management services, please visit www.saltmarshfa.com.


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