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Financial Happenings Blog
Tuesday, September 08 2009

Since our last edition we have updated the Dimensional Fund Performance Graphs page on our website.  The graphs show the performance of the Dimensional funds that we use to build investment portfolios for our clients.  They have been updated to contain data up until the end of July 2009.

The graphs show strong monthly returns over the month for the Australian share asset classes and Emerging Markets with international share investments relatively flat.
Over the long run, the graphs continue to clearly show the existence of the risk premiums (small, value and emerging markets) that the research tells us should exist.
Australian Share Trusts - 7 Year returns:


7 Yr Return

to July 2009

Premium over ASX 200

Accumulation Index

ASX 200 Accumulation Index



Dimensional Australian Value Trust



Dimensional Australian Small Company Trust



International Share Trusts - 7 Year returns:


7 Yr Return

to July 2009

Premium over MSCI World (ex Australia) Index

MSCI World (ex Australia) Index



Dimensional Global Value Trust



Dimensional Global Small Company Trust



Dimensional Emerging Markets Trust



NB - These premiums are higher than what we would expect going forward.
Please click on the following link to be taken to the graphs - Dimensional Fund Performance Graphs.
For anyone new to our website, it is important to point out that we build investment portfolios for clients based on the best available academic research.  Take a look at our Building Portfolios and Our Research Based Approach pages for more details.  In our view, this research compels us to use the three factor model developed by Fama and French.  In Australia, the most effective method of investing using this model is through trusts implemented by Dimensional Fund Advisors (  We do not receive any form of commission or payment from Dimensional for using their trusts.  We use them because they provide the returns clients are entitled to from share markets.
However, academic theory is nothing if it can not be implemented and provide the returns that are promised by the research.  Therefore, we like to provide the historical returns of the funds that we use to build investment portfolios.

Please let us know if you have any feedback regarding these graphs by using the Request for More Information form to the right or via our User Voice feedback forum.

Posted by: AT 09:15 am   |  Permalink   |  Email
Monday, September 07 2009

Recently a number of younger clients have held appointments with part of the discussion evolving around how well they were positioned to meet their future financial goals.

The difficulty at earlier stages of wealth accumulation is that you tend to be on lower levels of income compared to latter years of life and you therefore tend to have very luttle if any ability to save and build wealth.  Therefore it is difficult to know whether you will be able to reach long term goals such as retirement and the like.

A simple tool we use is Benchmarking your financial position in terms of stages of life.

One formula set out in Stanley and Danko's "The Millionaire Next Door" is Age multiplied by Pre Tax Household Income divided by 10.

By this formula, a 30 year old person with an income of $30,000, would have a target wealth of (30 × $30,000) / 10 which equals $90,000. 
This is a useful start, but we decided that a model more suited to the Australian context, and the realities of life, and could be developed.  Importantly, we think that the formula proposed by Stanley and Danko is unrealistic for people just starting work, and for those at the point of retirement.

Our approach is slightly more complex and rather than replicate the entire analysis here, for those interested please click on the following link to be taken to the article on our website -

Benchmarking Your Financial Position

Posted by: AT 09:13 am   |  Permalink   |  Email
Monday, September 07 2009
The latest edition of our email newsletter has been sent to subscribers last week.

Since that last edition, equity markets have continued to provide solid gains and many Australian and global economic indicators have improved.  We provide the updated data in our market news section.

When might we get back to the levels of late 2007?  Vanguard's updated volatility chart provides some insights in our Fascinating Financial Facts section.

We have also added a new section - From the Archives - which looks at previous articles that have pertinence to current events.  The first article looks at Inflation Linked Bonds which have come back on the agenda thanks to an announcement that the federal government will commence re-issuing these bonds.


Also in this edition we:

  • discuss the issue of index hugging by major Australian share funds,
  • look at investment strategies for a delayed retirement,
  • provide a link to Scott Francis' latest Eureka Report articles,
  • link to Russell Investments Investor Toolkit,
  • discuss benchmarking your financial progress, and
  • provide evidence of the three factor model in action.

Click on the following link to have a look at the full newsletter - Financial Fortnight That Was - 2nd September 2009.

Scott Keefer

Posted by: AT 08:40 am   |  Permalink   |  Email
Tuesday, September 01 2009
With much more positive equity market conditions over recent months, especially compared to early March 2009, many are starting to ask how long till we get back to the levels of early November 2007.

Vanguard have recently updated their Volatility Chart which provides some useful data proving insight into this question.  It charts the growth of $10,000 invested in the Australian share market at the beginning of July 1978.  Over that time it also reports on the extent and length of market declines and recoveries.

March 6th was the bottom of the most recent decline.  To get there the market fell 48.3% and it took 16 months to do so.  The average decline since mid 1978 has been 24.6% and lasted 8.6 months.  So this latest decline has been much deeper and longer than usual.  The average time to recover from a decline has been 15.3 months.
However, the longest time to recover has been 63 months after the crash of 1987 - a decline of 43.5%.  A decline similar in magnitude to the one we have experienced through 2008 and early 2009.

We are now 6 months into a recover which suggests there is some way to go before getting back to 2007 levels.  The years following 1987 suggest there is a long way to go.

Scott Keefer has been asked a similar question by Morningstar journalist Fiona Harris.  In his respons Scott has looked at historical returns data to estimate how long it might take for investors to make up the losses experienced in 2008 - See Investment Strategies for a Delayed Retirement.

Please clink on the following link to view Vanguard's Volatility Chart for yourself.
Posted by: AT 07:41 pm   |  Permalink   |  Email
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