I could write a lot about why I recommend Dimensional Funds for client access to the markets – what fuels their plans. You see the PLAN is what you want to eventually do with your money. INVESTING is what fuels your plan. People get these two backwards and prioritized wrong!
Fundamentally, if you invest through the lens of globally diversified and broadly defined indexes, ALL of those holdings would have to go to zero in order for YOUR money to go to zero (the opposite of what happens when you concentrate a lot to one company stock and it goes to zero). The world would likely be a very different place if thousands of holdings suddenly had no value – and I submit to you that you would have more to worry about than the value of your investments in such a world.
Here is a series of videos on how investing under such an approach works – Sensible Investing You Tube.
And here are some articles on Dimensional via other advisers and writers:
Moral of the story: Yes, investing is important – but it’s not the end all most people think. Having a sensible, prudent and academically supported philosophy and approach makes implementation of your plan easier – and a bit more likely you’ll reach your planned destination.
In the interest of disclosure: I do use Dimensional sub-managed SA Funds with most clients (not a fund requirement, but a business standardization decision I’ve made because of the evidence based approach. A short video (2:39) about Dimensional’s approach.
Analogies that explain the difference between investing and planning which many don’t realize are different:
- Investing is the fuel for your plan – it is not the plan itself.
- Investing are the cables that support your bridge which is the plan that gets you where you are to where you want to get to.
This blog is not a solicitation; simply an explanation of a basic philosophy and approach.