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Mutual Fund News

ME AND MY MONEY

Special to The Globe and Mail

Carson Brown, 27

Occupation

Product manager

The portfolio

DFA Global Balanced Fund

The investor

Carson Brown initially had his portfolio in mutual funds at a bank. But after three turnovers in advisers, he switched to a do-it-yourself passive approach using TD e-Series index funds. Then, just over a year ago, he discovered Dimensional Fund Advisors (DFA). While he's not recommending this to everyone, DFA is a one-stop solution that takes care of the portfolio rebalancing for him. It's based on the findings of Eugene Fama, the University of Chicago professor who won a Nobel Prize for his contributions to the field of finance.

How he invests

Mr. Brown's money is in the DFA Global Balanced Fund. It combines about 10 DFA index funds into a portfolio spread across stocks (80 per cent) and fixed-income securities (20 per cent). There is an equal balance between Canadian, U.S. and international stocks.

Within the equity index funds, small-cap and value stocks are given extra weight. According to the Three Factor Model of Prof. Fama and Prof. Kenneth French, such stocks deliver higher risk-adjusted returns over the long term. "By actively tilting the passive approach in this manner, DFA funds have historically been shown to yield better performance than index funds and actively managed funds," Mr. Brown says.

The annual management expense ratio (MER) for the fund is approximately 0.65 per cent. DFA keeps costs down by not advertising. Also, portfolio turnover is reduced by using stocks from the whole market instead of third-party indexes. DFA funds can only be purchased through specially trained financial advisers. When their fee is added in, the overall annual expense for the DFA Global Balanced Fund is about 1.7 per cent.

Best move

Starting an aggressive "automatic saving" plan that funnels money from his paycheque into his investments.

Worst move

Using commission-based financial advisers at a bank.

Advice

"Spend less than you make, eliminate your debt, save regularly, be tax-efficient, then consider investment performance and return optimization."

Want to share your strategies? E-mail mccolumn@yahoo.com

© 2007 The Globe and Mail. All rights reserved.

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