Investment Philosophy

Thank you for allowing us the opportunity to share with you what we believe Wall Street and active money managers want to keep a secret from you. This is a very different approach to investing. One grounded in research from academia and passive in its implementation. But there is nothing passive about it. This theory is based on over 50 years of academic research, and is credited with four Nobel Prize winners known for their work in finance/economics-rather than with Wall Street research which is tainted and has many conflicts of interest. The theory was thus initially created from research and applied practically.

In the investment arena, there are two broad categories of investment philosophies; active management and passive management. Active management is the art of stock picking and market timing. Passive management refers to a buy-and-hold approach to money management. Most fund families employ active management. Dimensional Fund Advisors (DFA) employs passive management with an attempt to capture the risk and reward characteristics of different asset classes. Active management bears additional cost through portfolio turnover and trading, thereby reducing return.   DFA has very little portfolio turnover.

First and foremost, DFA funds are strictly institutional funds, they are not available to the general public. The minimum investment in any of their funds is $2,000,000. Access to their funds is very limited and only available thru a small select group of advisors.

Rex Sinquefield, co-chair of DFA, had this to say about active vs. passive management:

“It is my contention that active management does not make sense theoretically and isn’t justified empirically. Other than that, it’s O.K. But it’s easy to understand the allure, the seductive power of active management. After all, it’s exciting, fun to dip and dart, pick stocks and time markets; to get paid high fees for this, and to do it all with someone else’s money."

Passive management, on the other hand, stands on solid theoretical grounds, has enormous empirical support, and works very well for investors.”

Utilizing this philosophy gives you broad diversification, eliminates all the guess work in creating your own portfolio, which in turn eliminates and/or reduces common emotional investor mistakes.

This is a very brief explanation, for more on this topic please contact our firm.