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 were a step behind their promise during this time period.  

That doesn’t mean, however, that they won’t win over other time durations.  But long term, there will likely be just small performance differences between these two great giants.  

January 1, 2007 – April 30, 2018

Portfolio 1= Dimensional Fund Advisors (DFA)

Portfolio 2= Vanguard’s indexes