The Dimensional Fund Advisors Versus Vanguard Battle
There’s no longer an argument that index funds beat actively managed funds.
But there remains a battle between two types of index funds. DFA (Dimensional Fund Advisors) claim to reign supreme.
They tilt their portfolios towards small cap and value cap. They also claim to have a superior way of trading.
But when comparing DFA’s funds to Vanguard’s index funds (in an apples-to-apples test) I found that Vanguard won. I first wrote about that here, testing DFA’s funds against their Vanguard equivalents.
I’ve since updated that comparison.
Here’s Portfolio 1, Comprising DFA’s Funds
Here’s Portfolio 2: Vanguard’s Equivalents
Using Portfoliovisualizer.com, I compared results from January 2007 until April 30, 2018.
As you can see below, Vanguard’s Portfolio (Portfolio #2) won once again. It averaged a compound annual return of 6.67 percent.
In contrast, DFA’s equivalent funds managed a compound annual return of 6.63 percent.
The race was close. But Vanguard did win.
What’s more, Vanguard’s equivalent funds recorded a standard deviation of just 16.95%.
Standard deviation is a measure of volatility. The lower the better.
DFA’s equivalent was more volatile, recording a standard deviation of 18.07%.
I love DFA’s funds. But in an apple- to-apples (factor to factor) test against their Vanguard’s equivalents, they’re a step behind their promise.
January 1, 2007 – April 30, 2018
Portfolio 1= Dimensional Fund Advisors (DFA)
Portfolio 2= Vanguard’s indexes