DFA US Targeted Value DFFVX

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cheerful runner
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Joined: Mon Oct 26, 2015 6:19 pm

DFA US Targeted Value DFFVX

Post by cheerful runner » Mon Mar 19, 2018 9:09 am

I'm investing new money into a supplemental 457(b) offered by my employer to provide more flexibility in case I'm able to retire early. I recently learned that I have access to DFA's US Targeted Value Fund (DFFVX) through Valic.

I know there are some Bogleheads who are proponents of DFA and believe they have the secret sauce. For those that believe this and follow DFA, I'm curious what you think about this fund. For my plan, the fund ER is 0.37 and I'm told by my Valic rep that they charge a 0.1% management fee. There are no other Valic funds offered that look beneficial considering the extra 0.1% fee. My other 457(b) option is through TIAA CREF which I already invest in through my employer's 401(a).

Additionally, I already tilt to small value with Vanguard's VSIAX. DFFVX would just supplement this investment and perhaps get to a 50/50 split between the two.

Thanks in advance.

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GreatOdinsRaven
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Re: DFA US Targeted Value DFFVX

Post by GreatOdinsRaven » Mon Mar 19, 2018 10:28 am

The size factor loadings of these funds are basically the same. DFFVX has roughly a 2.3X higher value load than VSIAX. If you believe in the value factor and if the expenses were the same then you should use DFFVX instead of VSIAX. But, their costs are not the same and since their factor weightings aren’t the same it’s difficult to compare them. If you don’t believe in the value factor, then you shouldn’t use either of them.

You get more factor weighting bang for your buck with the DFA fund. Do you think that the higher value weighting in the DFA fund will overcome the much higher cost compared to the Vanguard fund? Swedroe and others have posted many many posts about such issues.

To cloud the issue, honestly, you’d be better off using IJS if it was available to you (it almost certainly won’t be available to you in your retirement account, though...). It has higher factor weightings than the vanguard fund, is closer to the DFA fund and much cheaper.

https://www.portfoliovisualizer.com/fac ... sion=false
"The greatest enemies of the equity investor are expenses and emotions." -John C. Bogle, Little Book of Common Sense Investing. | | "Winter is coming." Lord Eddard Stark.

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cheerful runner
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Joined: Mon Oct 26, 2015 6:19 pm

Re: DFA US Targeted Value DFFVX

Post by cheerful runner » Mon Mar 19, 2018 12:12 pm

GreatOdinsRaven,

Thanks for your response. Yes, you can say I believe in small and value factors. For a number of reasons I've decided to tilt to small value and it is a part of my IPS. Thank you for your analysis and link. I didn't know I could go to portfolio visualizer to make factor comparisons. You are correct that I don't have access to IJS in retirement accounts. I've not yet started a taxable account because of all the space we have in retirement accounts ...401(a), 403(b), 457(b), Roth IRA, spouses simple IRA. However I may start a small one this year to provide some additional flexibility when I approach retirement.

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asset_chaos
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Re: DFA US Targeted Value DFFVX

Post by asset_chaos » Mon Mar 19, 2018 3:46 pm

If you go to morningstar and look at a growth chart with both funds, you'll see that over the past 10 years the plots are practically indistinguishable. However, if you ask for the maximum time, the plots go back nearly 20 years, and there is a noticeable difference with DFFVX ahead with what by eye looks like similar standard deviation and maximum draw down. Adding a curve for S&P 500 total return shows that over this 20 year period both small value funds provided a handy return premium to the S&P 500. Project that to the future as you like. Personally I think the evidence is fairly good that small and value premia exist because there is real economic, non-diversifiable risk. If you can afford to take these particular risks and can be patient when the risks show up, then harvesting the premia may be meaningfully rewarding in the long term.
Regards, | | Guy

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