Fresh Start

As the cute AT&T commercials with the children conclude, “it’s not complicated; more is better.”  Click here to see one of the fun AT&T commercials.  Below I have presented yet another well written fact-based article on passive investing often referred to as “indexing”. However, articles on passive investing fail to capture the difference between indexing and passive investing as done by O’Reilly Wealth Advisors utilizing DFA Funds. They lump them together and call them indexing.  But there is a difference.   What is an index? Example, S&P 500 is 500 large US Companies published by Standard and Poor’s.  There are thousands of indexes.   They are arbitrary – folks gather in a conference room and choose a bunch of companies they think are representative of an asset class. Sure they may use some tools to help them choose, but ultimately it is a list that is limited in length.   Indexing works because you get reasonably good exposure to an asset class by “buying the index”.   But why not get excellent exposure to an asset class instead of just reasonably good?  It’s not complicated, more diversification is better!   DFA scientifically develops their list, and their goal is to choose almost ALL the companies in an asset class for a complete exposure. DFA’s passive funds provide a more thorough exposure than index funds.   It can be argued that DFA is a more appropriate “index” representing an asset class because it is more complete exposure to that asset class.   More diversification wins.  And sure enough, in most asset classes, in most periods of time, DFA funds beat index funds. Sometime...