Free Wealth Management Guide Building An Effectively Diversified Investment Por | Page 13

An index fund must sell companies that are no longer to be included in a particular index and buy a company to replace the company leaving the index. This can result in additional trading costs. Historically, there is a run up in a company’s stock price from the date its inclusion in an index is announced to the date it is actually added to the index. After the effective date, when the security officially becomes part of the index, the price of the security tends to decline. Asset class funds are not restricted to buying and selling securities at a certain time so they can avoid drawbacks such as these. Dimensional Fund Advisors Dimensional Fund Advisors (DFA) pioneered the concept of indexing and asset class investing. Rex Sinquefield and David Booth started the first S&P 500 index funds in 1973 – Booth at Wells Fargo and Sinquefield at American National Bank. In 1981, determined to improve upon some of the problems they’d encountered with indexing, the two men formed DFA. With the help of their former professor at the University of Chicago, Gene Fama, Sr., Sinquefield and Booth developed what is known today as asset class investing. Over the last 32 years, DFA has created deep working relationships with some of the world’s leading financial economists to bring their latest theories and research to practice. By acting as a conduit between scientists and investors, DFA has created investment strategies to meet the evolving needs of investors. DFA’s investment philosophy is based not on speculation but on the science of capital markets. Their mission is to deliver the performance of capital markets and increase returns through state-of-the-art portfolio design and trading. Conclusion Depending on your individual situation, following the steps outlined in this Wealth Guide may increase your chances of achieving superior long-term investment results. While much of the investment media and brokerage industry leads you to believe that stock picking and market timing is the key to attaining superior investment performance, research has shown this is most often not true. This portfolio is easy to implement and maintain and is based on more than 60 years of academic research. It uses a very sophisticated strategy to create a portfolio of low cost asset class mutual funds. The portfolio represents multiple asset classes with holdings in over 12,000 companies in over 44 different countries. The portfolio tilts the weighting of the portfolio to small and value companies and adheres to a buy & hold approach requiring patience and discipline. The portfolio is rebalanced periodically to the target allocation that is established based upon your risk tolerance. At Solid Rock Wealth Management we have created twelve model portfolios, six for qualified money (IRA, 401k etc.) and six for non-qualified accounts. In our non-qualified models, we use tax-advantaged mutual funds to help reduce the income tax consequences associated with the funds. Our six models range from conservative to aggressive. These model portfolios are designed to provide optimal returns for your risk tolerance. The weighted average expense ratios for the entire portfolios are very low, ranging from .19% to .42% depending on the model chosen. For additional information, call Chris Nolt at 406-5821264 or email him at [email protected]. Today, Dimensional Fund Advisor’s board of directors is comprised of Nobel laureates and some of the world’s most respected economic professors. They have become one of the largest and most respected mutual fund companies in the world. As of December 31, 2012, DFA manages over $261 billion dollars. 13