The following is an article written by Jim Parker, Regional Director, DFA Australia.  It nicely sums up the approach taken by Dimensional Fund Advisors (DFA) towards investing.  From reading our website you would be well aware that we utilise Dimensional trusts within our recommended portfolios for clients. The following commentary sits very comfotably within our approach.  For more details about our particular approach to investing please take a look at our Building Portfolios page.

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They are comments frequently overheard these days on the bus, at the gym, supermarket and at Saturday sport: "The markets are in such a state. I'm worried about my retirement. There has to be a better way to invest."

There's no doubt about it. At times like these, when markets are hugely volatile and unpredictable, the patience of even the most disciplined investor can be tested. The good news is that there is a better way:

• First, there is nothing to be gained from trying to second guess the market. The fact is most people go wrong taking stock-specific bets or seeking to time their entry and exit points. Ultimately, they just end up buying high and selling low. This is never a recipe for success.
  
  
• Second, it's worth recalling that not only are risk and return related, but that not all risks are worth taking. This means the best approach is to structure your portfolio around the risks that research shows carry a reliable long-term reward. In tough economic times, uncertainty increases and people gravitate toward safe assets. To attract investors back to risky assets, prices adjust lower. What's often overlooked is that a lower price equates to a higher expected return.
  
  
• Third, the best protection against volatility is diversification. It should be evident by now that even "gurus" have no idea which asset class will be the next top performer and which will lag. But if you remain broadly diversified, you don't have to take those sorts of bets.
  
  
• Fourth, the biggest determinant of the performance of your portfolio is in how you allocate your capital toward the respective asset classes: Cash, fixed income, domestic and global equities, property and emerging markets?and within equities, large, value and small stocks.
  
  
• Fifth, while markets are inherently unpredictable, there are things you can do to lessen the pain. Among them is paying heed to the costs. Paying big fees to fund managers to invest your money based on a hunch is not recommended. Neither are high turnover strategies that leave you with a big tax bill. You can control these things.
  
  
• Sixth, indexing is not the only alternative to stock picking and market timing. Why pay managers to outsource decisions to an index provider? There are unnecessary costs involved there as well, as stocks enter and leave the index. A better way is to structure highly diversified portfolios around specific dimensions of risk.
  
  
• Seventh, in choosing someone to invest your money, ensure that in their own practices they follow the above advice. They should minimise transaction costs, be mindful of the tax effects of trading, and remain patient, disciplined and focused on long-term returns. The emphasis should be on implementing those strategies as efficiently as possible, not chasing last year's best performers or following fickle fashion.
  
  
• Eighth, keep it simple. Much of the financial services industry has a vested interest in making investing sound complicated. That, after all, is how this global crisis started. People got complacent and started taking highly leveraged bets on complex securities that few understood. You need to be absolutely clear about what risks you are taking on.
  

The eight points above reflect how Dimensional views investing. We recognise that markets are unpredictable. We don't pretend to know what will happen next. But we do understand the sources of long-term returns. And we have built up formidable expertise over nearly three decades in capturing those returns as efficiently as possible, without taking unnecessary risks.

Unlike other fund managers, we don't try to pick stocks or time markets. That's speculation, not investment. Neither do we leave the definition of our strategies to index providers.

What we do is structure highly diversified, low-cost strategies around the known sources of risk and return. We have a disciplined, transparent and patient trading process that is not dependent on hunches or the talents of star individuals riding their luck. We are not interested in chasing trends.

Our clients share this belief, which means our strategies aren't subject to the sort of hot money inflows and outflows that blight other fund managers. That in turn becomes a source of strength, as it helps to keep our costs low.

Yes, the market volatility is causing a lot of pain right now. There is no getting away from that. But we have built up deep insights over the years in how to efficiently trade in those parts of the market subject to large swings.

For instance, we developed sophisticated execution tools that enable us to trade in very thinly traded stocks, so we can take advantage of price volatility. With this sort of volatility now evident even in much larger, more liquid stocks, these tools are proving even more invaluable.

Bear in mind, also, that even in volatile markets, momentum effects still need to be taken into account. We do this by delaying trading "fast-moving" stocks. In other words, we don't sell the companies that are moving up the fastest and we don't buy the companies that are falling the hardest.

Another major risk in volatile markets is that there is an increase in unnecessary trading. This is expensive. Momentum filters control this effect, delaying trades and preventing unnecessary turnover.

This is a patient, low-key disciplined approach, one focused on ensuring clients' assets are invested with little or no market impact. Informed by the most rigorous academic research, it's an approach that takes the guesswork out of investment and reflects the broad philosophy described above.

Obviously, there will be periods when markets go down. But crises come and go and markets eventually recover. By minimising volatility and focusing on things you can control, you can ensure you are properly positioned for the inevitable rebound in risk assets when it comes.

It simply is a better way to invest.

Scott Francis has provided commentary towards an article written by Alex Tilbury and published in Monday's Courier Mail - 27th October 2008 - Tips for saving money in your 20s.

In the article, the following comments were attributed to Scott:

Scott Francis, a financial planner from independent advisory A Clear Direction at Milton, says the difference between financial success and failure might be as little as $20 a week.

"If someone saves $20 a week through their 20s, and invests in some sort of balanced portfolio, they can expect to have somewhere around $30,000 by the time they turn 30," he says.

Conversely, someone who spends $20 a week more than they earn is likely to have around $30,000 in debt.

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Francis says the 50 year return from Australian shares to the end of June 2008 has been 12.2 per cent a year, while inflation has been 5.2 per cent a year.

So he says if someone put aside the equivalent of $1,000 (in today's dollars) 50 years ago would now have an amount of $29,500 today - that's a 30 fold increase in purchasing power.

That's the "miracle of compound interest" which means the sooner money is invested, the sooner it is working for you.

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Francis says the 50 year return from Australian shares to the end of June 2008 has been 12.2 per cent a year, while inflation has been 5.2 per cent a year.

So he says if someone put aside the equivalent of $1,000 (in today's dollars) 50 years ago would now have an amount of $29,500 today - that's a 30 fold increase in purchasing power.

That's the "miracle of compound interest" which means the sooner money is invested, the sooner it is working for you.

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Francis recommends 20-year-old start now and save a small amount of your income every week (even $20 a week adds up over time)

"Stay away from the lure of credit cards and high interest loans - spending money that you don't have now only means that you have to pay more (because of the high interest) later," he says.

"Challenge the idea that greater consumption leads to greater happiness: there is no evidence for this everywhere, yet it is what every advertiser wants us to believe"

I would love to be able to provide the answers for investors but the reality is that I along with every other "expert" really have no clue.

The truth is that no one can provide any definitive answer which unfortunately only helps to add fuel to the fear.  Our approach is to look at the fundamentals of investment markets through history and promote a cautious approach to investing using whole of market style trusts - See our Building Portfolios page for more detail.

Unfortunately the great amount of fear being experienced in markets brings out some less than scrupulous characters.  A few weeks ago I received an unsolicited offer from a group called Hassle Free Share Sales.  This generous organisation offered to buy my Woolworths shares from me.

(As an aside, some may ask why I hold shares when I promote a passive investment approach to investing.  These shares were the first shares I ever owned and were purchased in Woolworth's IPO in 1993 - so they have some sentimental value along with some significant capital gains implications if I were to sell them.)

Back to Hassle Free Share Sales - they offered to buy the shares for $14.45.  The market price at the time was $28.90.  It is now $26.08 - Friday's closing price.  They also stated that there would be no brokerage or stamp duty.

Thanks very much but no thanks!!!

What groups like Hassle Free Share Sales and others (including probably the most famous operator - David Tweed) are trying to do is prey on smaller investors who may be less sophisticated in their approach to share ownership.  These investors are the most vulnerable at current times.  They hear, and read all the fear thanks to the media but are less likely to have a financial advisor or even broker assisting them in their decision making.  This offer comes along and it seems an easy way of selling their shares.

Please don't do it!!!

If you feel you can not take the stress that you might be feeling at the moment and / or you feel you have to sell than you should take the time to get proper advice and sell your shares on the market at the best price you can, not through a shonky operator like this.

For more information on this topic take a look at the following links:

NSW Government Office of Fair Trading warning in December 2007 about Hassle Free Share Sales - Be wary of share buying offers

A recent article from Vanguard on the topic - Taking cruel advantage in a troubled market

ASIC's Financial tips and safety checks site - FIDO - Unexpected offers to buy your shares

David Tweed's Wikipedia entry - http://en.wikipedia.org/wiki/David_Tweed

Regards,

Scott Keefer

In his latest article written for Alan Kohler's Eureka Report, Scott looks at the plight of mortgage funds in light of the governmant guarantee of bank deposits.

In particular, Scott compares some of the funds being mentioned at present - AXA, Perpetual & Challenger - with some failed investments of the recent past - e.g. Wespoint & Fincorp - concluding that the funds that are in the media at present have a much sounder model.  However they offer similar returns to those being offered by cash accounts which are now rated more highly.

Scott also takes a brief look at the impact of the government guarantee of bank deposits on listed fixed interest securities.

Click on the following link to read Scott's analysis - Last rites for mortgage funds?.

There is an understandable lure towards implementing a Self Managed Super Fund through which you can invest and control your superannuation assets rather than leaving it up to someone else.  An article I read today suggested that there were over 372,000 SMSFs in Australia as of early 2008 with 47,500 new funds registered in 2007.

So is it worth getting on the band wagon?

My response to that question revolves around three key determinants:

·         Costs,

·         Benefits, &

·         Responsibility

Cost

A key element in the decision making around any investment alternative is the cost of implementing and maintaining the strategy.  The article I was reading outlined the Australian Tax Office's annual return data for Self Managed Super Funds.  It suggested that the ratio of operating expenses to total assets for SMSFs were:

·         10.51% for funds with assets of up to $50,000

·         between 2.63% & 3.55% for funds with balances between $50,000 & $200,000

·         2.26% for funds with assets between $200,000 & $500,000

The 2008 Rainmaker Fee Review provides some perspective for these fees.  This review suggested that workplace super funds now average 1.41%.

What are the fees for a superannuation portfolio we would recommend?

Based on a 40/60 portfolio - 40% invested in defensive assets such as cash and fixed interest investments and 60% invested in growth assets such as Australian shares, international shares and property our fees come in at:

·         $50,000 portfolio - 1.66%

·         $200,000 portfolio - 1.34%

·         $500,000 portfolio - 1.18%

We feel that our fees are very competitive both against workplace averages but especially when considered against the SMSF averages mentioned above.

Benefits

Fees are important but not the only criteria to consider.  Benefits from using a self managed super fund can range from the control it allows you to take of your own investments to what investments you can actually include within the fund.  For instance, under certain conditions you can include art work and even business property with the superannuation fund.  There are some clear rules about these more unusual asset classes including the sole purpose and arm's length test but a self managed super fund definitely provides other asset class opportunities.

If you are not interested, or do not see the value of holding these assets within your superannuation fund then this benefit disappears.

In terms of the control benefit there are other ways of having more control of your super without going down the SMSF path.

We employ an administration service for the majority of our superannuation and pension clients.  Using this service, clients through their financial advisor, are able to purchase a large range of assets within their fund including shares listed on the ASX.  They therefore take significant control of their portfolio.  No art work or business real property but not everyone has that compulsion.

We are open in saying that we would love the costs of using such services to be cheaper but with the rebate we receive from the provider we use which we pass on in full to our clients, we can keep overall costs below average SMSF and the workplace averages.

Responsibility

Unfortunately, with more freedom and control comes greater responsibility.  A lot more scrutiny is being placed on self managed super funds.  Anyone who is contemplating going down this path must be prepared to take on the trustee responsibilities that come with this.

Our preference is to use an administration service which will take on the trustee responsibilities for you including completion of tax and auditing requirements.  As long as the cost of this service is kept to a minimum we believe the benefits and peace of mind it provides clients is well worth it.

Self Managed Super Funds definitely have their place providing benefits to users and if well managed can even be quite cost effective. 

Our preference though, is to not recommend the use of SMSFs as an administration service can provide just us much control at lower costs without the trustee responsibilities.

If you wanted to discuss this issue in more detail please get in contact for a free no obligation meeting / discussion.

Regards,

Scott Keefer

In his latest article written for Alan Kohler's Eureka Report, Scott looks at six basic elements of a financial planning strategy all investors should consider.

In particular, Scott looks at:

1) Investing regularly over time (dollar cost averaging)
2) Repaying non-tax-deductible debt
3) Borrowing to invest
4) Salary sacrificing to superannuation
5) Transition to retirement strategy
6) Income planning in retirement

Click on the following link to read Scott's analysis - Financial planning's big six.

For the second blog of the week I want to refer to a piece written by Jim Parker, Regional Director, DFA Australia Limited.  Jim suggests there are 10 reasons to be cheerful about the global economy and the state of investment markets.  I am sure that neither Jim nor I want to be seen as flippant given the current market conditions but it is very easy to be bogged down in all the "Armageddon" type commentary surrounding us at present.  Jim's viewpoint provides a much more palatable outlook:

1. An awful lot of bad news is in the price. It is the nature of markets to assimilate new information quickly, which means that as we all sit around feeling gloomy, markets have usually moved on.

2. In bad times, demand for risky assets falls. So the compensation for taking this risk needs to adjust higher to attract investors. Lower share prices relative to fundamentals just means expected returns are higher.

3. Governments in the US, Europe, the UK and Australasia are pulling out all the stops to recapitalise their banking systems and get credit flowing again. The extraordinary response of risk assets to recent moves on this front shows how important confidence is in supporting markets.

4. Central banks have mounted a globally coordinated reduction in benchmark interest rates. Markets are priced for further moves. Insofar as banks pass on these lower borrowing costs, this will support business and consumer activity, buttressing the real economy.

5. Some governments are providing fiscal stimulus to bolster economic activity. Australia, for instance, recently unveiled a $A10.4 billion package. In the US, there is talk of a post-election stimulus plan.

6. Oil prices, which until recently were seen as a major threat to global growth, have retraced significantly. From late July until early October, crude oil futures fell by 45 per cent from a record $US147.27 a barrel.

7. According to Dimensional research, the average duration of bear markets in the US from the end of 1965 until the middle of this year was about 14 months.  This one has now lasted just on a year. This is not to claim it is near an end, but the longer it goes on, the closer is the next bull market.

8. Someone is buying. It's important to remember that on the other side of the trade from all those people liquidating their portfolios and mutual funds are other investors who are happy to buy. While some are market timers, others see this as a long-term buying opportunity.

9. Unless you have sold your holdings, your losses so far are only on paper. Market recoveries after prolonged downturns tend to come in quick sudden bursts. All you need to do to capture those recoveries is to stay in your seat.

10. The sun will come up tomorrow. Anxiety over the market downturn is understandable. But there have been crises before. The world moves on and risk appetites have a tendency to reassert themselves.
    

Thanks for the upbeat assessment Jim.

Regards,

Scott Keefer

The first few blogs for this week will unashamedly be referring to articles written by a number of commentators and investors.  I am very open in saying that there are many others out there who are much wiser than I.

I kick off with an item penned by none other than the sage of Omaha Warren Buffett.  Buffett has been widely quoted throughout media circles saying that he is buying into equities at present, not selling out.  In this piece he simply and coherently explains why he is buying American stocks for his own personal account.  The article can be found on the New York Times website - Buy American.  I Am.

For certain Warren Buffett is not the fountain of all wisdom but I would sure rather "bet" on him compared to some of the market commentators who get bandied around.  In terms of a great old Australian saying - he has runs on the board.

Buffett is moving from a position of holding only US government bonds into holding 100% US equities within his personal account.  His argument goes like this:

Rule: Be fearful when others are greedy, and be greedy when others are fearful

Comment: Most certainly fear is now widespread but fears regarding the long-term prosperity of the nation's many sound companies make no sense.

Rule: He can not predict the short-term movements of the stock market.

Comment: What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up.  So if you wait you may miss out.

Buffett then goes on to provide a brief history lesson of the last 100 years particularly mentioning the depression, World War II and the inflation raged 1980's.  All saw the stock market bottom well before good news arrived with the conclusion being that bad news is an investor's best friend letting you buy a slice of America's future at marked-down prices.

Finally Buffett comments on holding only cash in a portfolio and refers to it as a "terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value."  Equities will almost certainly outperform cash over the next decade.

In conclusion he provides two great quotes:

"I skate to where the puck is going to be, not to where it has been." - Wayne Gretzky - probably the most famous ice hockey player of all time.

"Put your mouth where your money was.  Today my money and my mouth both say equities." - Warren Buffett

In his latest article written for Alan Kohler's Eureka Report, Scott looks at the recent 100 basis points interest rate cut and looks at the relative attractiveness of Australian share and listed property yields.

In conclusion, Scott suggests that investors should be looking at their investment income needs and the best way to achieve them.

Click on the following link to read Scott's commentary - Yields the new king?

"The problem is leverage, clear and simple," was how one journalist summed up developments in financial markets, noting that markets were freezing up, liquidity was lacking and investors had become risk averse.

The onset of recession, a weak US dollar and sinking real estate made for a gloomy combination, wrote another.

The crisis had all the markings of the end of an era, observed a third, suggesting that it would take years to clean up the mess of debt and high-risk products left behind by the sharper operators of Wall Street.

The financial strains were accompanied by political tensions. In the US, the Bush administration was under attack over its handling of the war in Iraq, which had driven up oil prices, and its management of the economy.

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The following quotes were referred to by Jim Parker, Regional Director, DFA Australia Limited, in his monthly commentary piece for the Dimensional Fund Advisors website. 

All of those observations Jim referred to were made within a few days of each other in January 1991, more than 17 years ago.

A word of caution before proceeding, I do not want to downplay the seriousness of what is happenning in financial markets around the world.  It is a very difficult time for investors (& their financial advisors).  However, that being said, the majority of the financial press is feeding on the fear frenzy out there using lots of headlines like plunged, carnage, smashed and the like.  Sure things are very tough but their are other viewpoints.

Our approach at A Clear Direction is that investors should be staying the course with their investments especially if they have a long investment timeframe before needing to draw an income from their investments or they have heaps of cash and fixed interest securities to rely on so that they do not need to be selling growth assets.  Another absolute key is to be extremely well diversified both across asset classes - cash, fixed interest, Australian shares, international shares and listed property - but also within those asset classes.

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So back to Jim's article.  The following is taken directly from Jim Parker's article.  It provides a much more positive perspective from which to be considering the current crisis. 

At that time (January 1991), the Anglo-Saxon economies of the US, Canada, the UK, Australia and New Zealand were all either in or flirting with recession.

The recession came on the heels of an era of financial excess, as exemplified on Wall Street by the junk bond king Michael Milken and in the movies by Gordon "greed is good" Gekko.

In the US, excessive and imprudent lending for real estate had contributed to the failure of hundreds of community-based 'savings and loans' institutions, triggering a multi-billion dollar government bailout.

In the United Kingdom, consumers who had leveraged themselves heavily to real estate suffered a severe blow when rising interest rates pushed house prices sharply lower, both in real and nominal terms.

In Australia, too, market deregulation had given way to an era of increasingly reckless lending by financial institutions, which until that point had had little experience in managing risky commercial loans.

The consequence in Australia was the failure of a number of major financial institutions, including the state banks of Victoria and South Australia, the Teachers' Credit Union of Western Australia, the Pyramid Building Society, merchant banks Tricontinental, Rothwell's and Spedley's and the Estate Mortgage trust.

Examining the causes of the early 1990s bust in the Anglo-Saxon economies, a Reserve Bank of Australia governor later observed that any boom built on rising asset values and financed by increased borrowing had to end.

At that time, the crisis seemed intractable and insoluble. Journalists and economists talked of systemic breakdown and a global challenge for market capitalism, much as they are now.

Now, while no two market crises are ever the same, it is fair to say there are parallels between today's downturn and the events of early 1990s, particularly in the damage caused by excessive leverage and insufficient oversight by many financial institutions of the risks they were taking on.

For those who lived through that period as investors (or even market commentators), you might recall the sense of doom and gloom and the over-riding fear in the financial markets at that time.

The important point is that markets worked through that period of dislocation and uncertainty to emerge stronger. Indeed, the early '90s recession was followed by a stellar decade for equities, one that would have passed by those who had given up in 1991 and hunkered down in cash.

This is not to predict that today's markets are ripe for a similar Phoenix-like revival, but it is a sage reminder that nothing lasts forever and that if you want the returns available from risk assets, you need to stay in your seat.

The risk of not doing so is highlighted in the tables and chart below. They show the returns over a near three-decade period (Jan, 1980-Aug, 2008) for four broad indices?two of relevance to US investors (the S&P-500 and MSCI EAFE) and two for Australian investors (the S&P/ASX-200 and the MSCI ex-Australia index). All returns are in local currency terms.

You can see in the tables and chart that had you missed the six best individual months in that period, the growth of wealth in a portfolio invested in the S&P-500 would have been half of what it would have been had you stayed invested. The results for the other indices are similar.

Bear in mind that six months represents less than two per cent of the period under study. So you can see how difficult market timing can be.

Market Returns: Jan 1980-Aug 2008

Dimensional Returns program; returns are in local currency terms

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In concluding, I want to stress the importance for each individual investor to consider their personal circumstances and situation.  Sure, history might suggest that you should stay invested in growth assets but your emotions and stress levels might be telling you otherwise.  If you are troubled by what is happenning to your portfolio the best thing to do is get in contact with a financial advisor you trust.

Regards,

Scott Keefer

In his latest article written for Alan Kohler's Eureka Report, Scott looks at the workings of the Future Fund to provide insight into how you should be approaching your investment philosophy.

In particular, Scott looks at the Future Fund's investment strategy, exposure to global shares and global real estate, and the slow building of the fund over time as an example of sound practice for self managed super fund holders.

Click on the following link to read Scott's analysis - Inside the Future Fund.

Last Saturday, 4th October, Scott Francis joined Warren Boland's "Weekends with Warren" program on 612 ABC Brisbane.  The major topic covered was personal finance strategies in the context of the "Credit Crisis".  The 6 strategies considered included:

1. Pay Down 'high interest' non - tax deductible debt (eg store cards and credit cards)
2. Regularly Investing in Growth Assets
3. Borrowing to Invest
4. Making Additional Mortgage Repayments
5. Salary Sacrificing to Superannuation
6. Income Planning for Retirement

Click on the following link to be taken to a summary of the material covered in the segment - Personal Finance Strategies in the Context of the "Credit Crisis"

Scott Francis has provided commentary towards an article written by Melanie Christiansen and published on page 10 0f Saturday's Courier Mail - 4th October 2008 - Panic could prove costly.

In the article, the following comments were attributed to Scott:

"Another financial planner, Scott Francis, said the situation might be worrying for those close to or newly retired, but he said for cashed up younger investors, there was "a little stench of opportunity'' in the air".

"I think this is a really exciting time for people far enough away from retirement not to be threatened,'' he said.

THE current financial market turmoil presents an "exciting'' opportunity for well-placed investors.

Instead of worrying about reduced values and selling shares when prices are low, he urges investors to take advantage of the situation.

"The price of shares now reflects all the fear and uncertainty, so you're potentially selling at a really bad time,'' he says.

"I think this is a really exciting time for people far enough away from retirement not to be threatened.''

Mr Francis says it is important to remember that shares should not just be judged on their values, but also the "pretty attractive income stream'' from dividends and also their franking credits.

He also advises people to stick with their superannuation, despite recent falling returns.

"Right now, it's distressing that the value of super is falling. But the nice thing if you are far enough away from retirement, you're still buying more assets at significantly lower prices than you had to pay 12 months ago.''

But he would encourage more people to take control of their super, rather than simply accepting the fund's default holding.

I have come across an online article published on Kiplinger.com that provides a really great summary of the approach taken by Dimensional Fund Advisors - This is Rocket Science.  It refers to the US operations of the organisation but the commentary is also a fair representation of the Australian based funds offered by DFA.

The key points in the article were:

• The board of DFA contains Nobel prize winning economist Myron Scholes along with University of Chicago finance professor Eugene Fama
  
  
• The DFA philosophy boils down to the relationship between risk and return:

·         Riskier stocks - small companies & those considered undervalued - produce higher returns on average over time.

• They use an index based approach but are different from index funds in that they employ pragmatic tactics:

1.             Flexible approach to indexing

a.       E.g. no REITs in the small company trust

b.       E.g. no recently listed companies in the small company trust

2.             Buying and selling shares based on momentum

a.       DFA believes that a stock that's moving dramatically one way or the other tends to stay in motion for a while

                                                                     i.      This means they won't buy a share that spirals down into the small company buy zone nor will they automatically sell a share that soars out of the small company range

3.             In the emerging markets arena they avoid whole countries that might otherwise be included in an Emerging Markets Index.  The main example at present is Russia because of an absence of strong property rights.

• DFA also offer modest operating costs.  The maximum fee on the funds that we use is 0.76% on the Emerging Markets trust.  The lowest fee is 0.25% on the Australian Large Company trust.

Dimensional funds make up a core part of the investment portfolios we recommend to clients.  We are impressed with the academic research that has gone into developing their strategies and also the relatively low cost alternative they create for investors.

If you wanted to see how we incorporate them into our investment philosophy take a look at our Building Portfolios page.

Regards,

Scott Keefer

In his latest article written for Alan Kohler's Eureka Report, Scott looks at the performance of Listed Investment Companies.

Scott reports that they have, on average, underperformed the market average over the 5 years lead up to the end of June 2008.  They have also under-performed over the 1 year bear market period to the end of June 2008 - a time when some market participants suggest that LICS should outperform.

Click on the following link to read Scott's analysis - LICs show their mettle.