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Financial Happenings Blog
Wednesday, March 31 2010

Users of our website, through our User Voice feedback forum, have requested that we regularly update the graphs outlining the performance of the Dimensional trusts that we use in building portfolios for clients.  In response to this feedback we have updated these graphs to reflect performance up to the end of June 2009.




The graphs show a flat month for all asset classes.


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 Feb 2010

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 Feb 2010

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 numbers are average annual returns for the 7 year period which are slightly higher than the annualised returns.


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.



Scott Keefer

Posted by: AT 10:30 am   |  Permalink   |  Email
Wednesday, March 31 2010

The press is littered with commentary about the growing housing affordability problem in Australia.  Scott Francis in his latest Eureka Report article looks at some strategies to help break into the property market.  He also throws in a brief discussion of whether it might be financially better to rent rather than own.

Please click on the following link to be taken to the article -
New paths to home ownership

Posted by: AT 01:07 am   |  Permalink   |  Email
Saturday, March 06 2010

Jack Bogle is the founder of Vanguard Investment Group and is a vocal proponent on the superiority of index funds for investors.  In the USA, Bogle has almost a cult like following.  One of those followers is Taylor Larimore is a former IRS officer and retired chief of the Small Business Association's finance division in South Florida.  He is co-author of two Bogleheads' books: The Bogleheads' Guide to Investing (Wiley, 2007) and The Bogleheads' Guide to Retirement Planning (Wiley, 2009).

Taylor was recently interviewed with the summary now posted on Morningstar's website.  Even though Taylor's comments relate to the US market, they are extremely applicable to Australian investors, especially those who want a simple, no-fuss investment portfolio in retirement.

If that's you, then please take a look at the Morningstar article - What the Bogleheads know for sure

Taylor's concluding comments speak clearly to me:

If you could sum up what you have learned during a lifetime of investing experience, what would you say?

My advice to be a successful investor is this: Save regularly, develop a personal asset-allocation plan, use a few broad market index funds, keep costs low (including taxes), avoid mistakes, strive for simplicity, and stay the course.

Sounds simple doesn't it.

Scott Keefer

Posted by: AT 01:54 am   |  Permalink   |  Email
Monday, March 01 2010

I hate to sound like a broken record but some more data has been recently published by Standard & Poor which provides evidence that an index based approach to investing will serve you well.

S & P have started to publish a bi-annual report looking at the investment performance of active managers as opposed to the benchmark S&P ASX200 and MSCI World ex Australia indices - Standard & Poor's Index Versus Active Funds Scorecard - Australia Year End 2009.  Their second report has been published this week and provides the following conclusions:

  • Over a five-year period ending December 2009, respective benchmark indices have outperformed the majority of active funds across the different peer groups covered by the SPIVA Scorecard. In contrast for the 2009 calendar year comparative analysis of the annual returns shows that a majority of active funds have outperformed their benchmark across most peer groups.
  • The S&P/ASX 200 Accumulation Index has outperformed 63% of active Australian equity funds over a five-year time horizon. Data over one year and three years shows an equal split between active funds underperforming and outperforming the index.
  • A majority of active Australian equity small-cap funds have outperformed the S&P/ASX Small Ordinaries Index across all time horizons. Most notably, 73% of active small-cap funds outperformed the benchmark index over a three-year period.
  • The MSCI World ex Australia Index has outperformed 69% of actively managed international equity funds in the last five years. However, the index has outperformed only 24% of actively managed international equity funds over the last year.

There is some cause to cheer for active managers as the results suggest that 2009 was a much better year on average compared to the index.  However the 5 year results still show that more than 63% of active funds under-performed over that period.  That suggests that the performance from 2005 to 2008 must have been particularly poor.

There has also been some cause to cheer for small company funds showing a strong record over 5 years.

Five years is still not a very long window but you would expect that over even longer periods active managers perform even worse.  The latest report is even further evidence that an active approach to investing increases the probability that you will perform worse than the average investor return - i.e. the index.

A Clear Direction's approach is to use index funds as they base and add to that small and value exposures.  Over the 5 years these exposures have provided after fee premiums of:

Australian small company exposure                     1.44%
Australian value exposure                                   0.87%

Over 7 years these premiums are even greater.

The results suggest the approach we are employing is positioning client portfolios well above the returns being provided by active managers.

Scott Keefer

Posted by: AT 07:52 pm   |  Permalink   |  Email
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