Consider a Simple, Efficient and Cheap Strategy

DFA Global Portfolios are some of the best one-stop asset allocation options in Canada.

Michael Dobson 10 March, 2023 | 1:07AM
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Michael Dobson: We at Morningstar consistently stress the importance of fees. Fees are the single biggest detractor from performance over time, so less you pay, the more you keep. If you're looking for a strategy with very low fees that goes beyond passive investing, you could consider the DFA Global Portfolios (DFA605). The strategy is simple, efficient and cheap, which supports a Morningstar Analyst Rating of Silver for the cheapest share classes.

The DFA Global Portfolios leverage decades of academic research that suggests that small, profitable and value stocks tend to outperform those with the opposite traits. The underlying equity funds tilt towards the small and cheap, and these tilts influence performance. The strategy has paid off recently. From the end of 2020 to January this year, the DFA Global 60-40 Portfolio beat its category benchmark by about 1.5% per year. The DFA Global Portfolios also charge some of the lowest expense ratios around between 34 to 36 basis points, far lower than the average allocation strategy in Canada.

So, how do they do it? It comes down to efficient and thoughtful trading. Each of the strategy's underlying funds trade around liquidity, buying names when others are selling and selling names when others are buying. That saves on transactions costs, which in turn DFA passes down to the investor. It's a big reason why DFA Global Portfolios are some of the best one-stop asset allocation options in Canada.

For Morningstar, I'm Michael Dobson.

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Michael Dobson  Michael Dobson is an Associate Manager Research Analyst at Morningstar Canada

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