Factor-based investing and the benefits of working with a financial advisor in the DFA network

For years it has been assumed that you have to be either an active or a passive investor. It is also assumed (depending on which camp you’re in) that one is better than the other. In our opinion, the argument about active vs passive management can be put squarely to bed–and the answer to which investing strategy we use is…Both. This is called factor-based investing and it is a strategy used by a company whose funds we use a great deal—Dimensional Fund Advisors (DFA).

A recent article from the Wall Street Journal, The Active-Passive Powerhouse by Jason Zweig, highlights the success of operating without the boundaries and dogma of staying in either an active or a passive strategy. It also identifies DFA as the fastest growing mutual fund company in the US.

The founders and advisors of DFA are pioneers of financial science and champions of efficient market theory which is built upon the foundation that “active management practiced by traditional stock pickers is futile, if not absurdity.”1

Markets Work

This is how DFA invests: “It designs its own indexes, often of small capitalization stocks, then waits—for weeks, if necessary—until an eager seller is willing to unload shares at below the prevailing asking price in the market. Such tactics can minimize and in some cases even erase transaction costs, providing a small but meaningful boost to returns.”2

When clients and potential clients ask how we invest, the answer is simple. We invest the way DFA invests: keeping transaction costs low, offering globally diversified portfolios and managing risk with returns and goals. Why do we invest this way? Because it is based on financial science, not prediction, and because it works.

Avoiding Behavioral Investing and the Institutional Advantage

In order to invest this way, one must have time, patience and not be swayed by outside forces that speak to the next big fund or stock or the pick of the day. One must also have a certain degree of access to institutional investments not available to the public. Dimensional Fund Advisors doesn’t currently offer its funds directly to individual investors mainly because they believe that investors should use an advisor if they wish to have long-term success in investing for their goals. We agree.

Our direct relationships with companies like DFA and the expertise of our investment team here at Flourish have helped our clients’ needs, goals and expectations be met and exceeded. Our independence allows us to make decisions that we know are right for our clients because we know you.

A good financial advisor’s ability to spend time executing this investing strategy, having access to these types of funds, acting as a buffer between your emotions and your investments, and with a fiduciary commitment to always acting only in your best interest is why using a trusted financial advisor like Flourish Wealth Management is a smart and efficient way to preserve and grow your wealth.


The Active-Passive Powerhouse by Jason Zweig

DFA recently added an individual investor feature to their website where people can learn more about the company and their investment approach.

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Flourish is Ten Years Old!

A decade ago, we embarked on a journey to empower and serve you with values-based financial planning. In 2024, we celebrate our 10th anniversary with immense gratitude for your trust and support. Here’s to many more years of flourishing financially, together!

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