Q) How do you build a client portfolio?
A) All portfolios are built with a globally diversified blend of institutional asset class funds.
Q) Why are your portfolios diversified rather than concentrated on past or expected winners?
A) Diversification is the most essential tool available to investors. It enables them to capture broad market forces while reducing the excess, uncompensated risk arising in individual stocks. Successful investing means not only capturing risks that generate expected return but reducing risks that do not. Avoidable risks include holding too few securities, betting on countries or industries and following market predictions. To all these, diversification is the antidote. It washes away the random fortunes of individual stocks and positions your portfolio to capture the returns of broad economic forces.
Q) Why do you build portfolios with asset class funds rather than stocks or traditional active mutual funds?
A) The odds of capturing the return of the intended asset class are better with asset class funds.
Q) What is an asset class?
A) A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations. Similar to an index, like the S&P/TSX Composite Index that represents the Canadian Market, an asset class represents an even broader aspect of the Canadian market.
Q) What is a Dimensional Fund Advisors asset class fund?
A) Institutional asset class portfolio funds offered by Dimensional Fund Advisors targets the entire stock market as its eligible universe. But unlike traditional approaches, the securities are not held in their market value proportions. Asset class portfolios increase the relative weight of small cap and value stocks, where expected returns are greater. Because the architecture is seamlessly integrated and includes the full range of securities, the costs normally associated with maintaining multiple vehicles are greatly reduced.
Q) Who typically uses asset class funds?
A) Asset class funds are typically used by large institutional pension plans.