Andy Baxley, Sr. Financial Planner at our Chicago office shares tips with CNBC on how to be strategic with year-end charitable gifts.

 

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Andy Baxley, CFP®, CIMA®, is a Financial Planner in the Chicago office of The Planning Center, a fee-only financial planning and wealth management firm. Email him at andy@theplanningcenter.com.

The post Consider These Year-End Tips to Lower Your Tax Bill or Boost Your Refund appeared first on The Planning Center.

By Andy Baxley, CFP, CIMA, Sr. Financial Planner

The earliest stock exchange dates to 17^th century Amsterdam and the various East India Trading companies, but it took hundreds of years of economic and technological advancements for equity investments to become widely accessible.

There were many important milestones along the way— the first modern mutual fund in 1924, the first index fund in 1971, and the rise of the exchange-traded fund (ETF) in the 21^st century (to name just a few).

Today, virtually anyone with a few dollars to spare can be an active participant in the global markets. It has never been easier to become a do-it-yourself investor.

To the surprise of many, it remains as difficult as ever to be a successful DIY investor. 

Acknowledging that “successful” investing is a highly subjective term, I will supply a definition— a successful investor is one who has clear goals, a thoughtfully designed and well-executed strategy, and the ability to avoid most major errors in judgement along the way (e.g., panic selling). 

Despite widespread accessibility and an endless sea of information to base our decisions upon, long term investment success as I’ve defined remains an elusive proposition for many. 

Why might this be? 

I believe the answer boils down to two factors— the knowledge gap and the behavior gap.  

The Knowledge Gap

Successful DIY investing requires a certain baseline level of knowledge. To design a sensible portfolio, we must first understand the relevance and application of key concepts such as allocation, diversification, asset classes, risk, inflation, and correlation.

Thanks to the internet, investors have access to more information than ever before. Whereas someone in the 1970s may have struggled to get enough information to build a sensible portfolio, the modern investor suffers from the opposite affliction. We are buried up to our necks in information and, more critically, misinformation. 

To quote Fox Mulder, “the truth is out there”, but we must know where to look and be vigilant to avoid faulty thinking and false promises along the way.

Bridging the knowledge gap requires that we learn the right lessons about investing. It’s a matter of quality, not quantity.

The Behavior Gap

The “behavior gap”, a term coined by author Carl Richards, is the difference between the rates of return that investment vehicles produce and the rates of return that investors in those vehicles actually earn.

Why is there a difference between the two? 

The answer lies in a simple, inconvenient truth—we are hard-wired to misbehave and misjudge. 

Our brains are beautifully complex systems evolved over millions of years, but they are far from perfect. Research from the field of behavioral economics has shown our internal decision-making mechanisms to be predictably and systematically faulty. The many ways in which our brains lead us astray have come to be called “cognitive biases”. 

On the wall in my home office I have a beautiful poster that lists the 188 known cognitive biases. 

A few of my favorites are—

• Confirmation bias—focusing on information that confirms pre-existing beliefs while ignoring information that challenges those beliefs.
• Familiarity bias—favoring that which is familiar over that which is unfamiliar, regardless of merit.
• Self-attribution bias—attributing successful outcomes to our own actions and unsuccessful outcomes to forces beyond our control. 
• Herding bias—the urge to mimic the crowd, even when the crowd is leading us over the proverbial cliff.
• IKEA effect—placing a disproportionately high value on something we built or put together ourselves.

And my personal favorite—

• Blind spot bias— the tendency to recognize cognitive biases in others while failing to identify our own.

It’s both unsettling and reassuring to learn that everyone—you, me, even Warren Buffet himself—is prone to cognitive biases and faulty decision making. That said, we are not all prone to a given bias to the same degree. 

It’s up to each one of us to learn which specific biases we’re most likely to fall prey to. This critical self-knowledge represents an essential chapter in your brain’s owner’s manual. 

—

To successfully navigate the investment wilderness, we must find a way to bridge the gaps in our understanding and decision making. This is difficult to do without the support of a skilled guide. After all, we don’t know what we don’t know. 

Fortunately, you don’t have to go it alone. We’ve been helping clients build, implement, and maintain successful investment strategies for decades. If you’re interested in hiring a guide for your investment journey, we’d love to talk with you.

Andy Baxley, CFP®, CIMA®, is a Financial Planner in the Chicago office of The Planning Center, a fee-only financial planning and wealth management firm. Email him at andy@theplanningcenter.com.

The post Mind the Gaps – Why Many DIY Investors Falter appeared first on The Planning Center.

KEY TAKEAWAYS

• Financial journalists periodically stoke investors’ record-high anxiety by suggesting the laws of physics apply to financial markets—that what goes up must come down.
• But shares are not heavy objects kept aloft through strenuous effort. They are perpetual claim tickets on companies’ earnings and dividends.
• If stocks have a positive expected return, reaching record highs with some frequency is exactly the outcome we would expect.

Investors are often conflicted about record-high stock prices. They are pleased to see their existing equity holdings gain in value but apprehensive that higher prices somehow foreshadow a dramatic downturn in the future. And they may be reluctant to make new purchases since the traditional “buy low, sell high” mantra suggests committing funds to stocks at an all-time high is a surefire recipe for disappointment.

Financial journalists periodically stoke investors’ record-high anxiety by suggesting the laws of physics apply to financial markets—that what goes up must come down. “Stocks Head Back to Earth,” read a headline in the Wall Street Journal in 2012.¹ “Weird Science: Wall Street Repeals Law of Gravity,” Barron’s put it in 2017.²  And a Los Angeles Times reporter had a similar take last year, noting that low interest rates have “helped stock and bond markets defy gravity.”³

Those who find such observations alarming will likely shy away from purchasing stocks at record highs. But shares are not heavy objects kept aloft through strenuous effort. They are perpetual claim tickets on companies’ earnings and dividends. Thousands of business managers go to work every day seeking projects that appear to offer profitable returns on capital while providing goods and services people desire. Although some new ideas and the firms behind them end in failure, history offers abundant evidence that investors around the world can be rewarded for the capital they provide.

Whether at a new high or a new low, today’s share price reflects investors’ collective judgment of what tomorrow’s earnings and dividends are likely to be—and those of all the tomorrows to come. And every day, stocks must be priced to deliver a positive expected return for the buyer. Otherwise, no trade would take place. It’s difficult to imagine a scenario where investors freely invest in stocks with the expectation of losing money.

Investors should treat record high prices with neither excitement nor alarm, but rather indifference. If stocks have a positive expected return, reaching record highs with some frequency is exactly the outcome we would expect. Using month-end data over the 94-year period ending in 2020, the S&P 500 Index produced a new high in ending wealth in more than 30% of those monthly observations. Moreover, purchasing shares at all-time records has, on average, generated similar returns over subsequent one-, three-, and five-year periods to those of a strategy that purchases stocks following a sharp decline, as Exhibit 1 shows.

^{For illustrative purposes only. Index is not available for direct investment. Performance does not reflect the expenses associated with the management of an actual portfolio. S&P data © 2021 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved.}

Humans are conditioned to think that after the rise must come the fall, tempting us to fiddle with our portfolios. But the data suggest such signals only exist in our imagination and that our efforts to improve results will just as likely penalize them.

Investors should take comfort knowing that share prices are not fighting the forces of gravity when they move higher and have confidence that record highs only tell us the system is working just as we would expect—nothing more.

<sup>1. Jonathan Cheng and Christian Berthelsen, “Stocks Head Back to Earth,” Wall Street Journal, February 11, 2012.
2. Kopin Tan, “Weird Science: Wall Street Repeals Law of Gravity,” Barron’s, August 7, 2017.
3. Russ Mitchell, “Tesla’s Insane Stock Price Makes Sense in a Market Gone Mad,” Los Angeles Times, July 22, 2020.</sup>

^{For illustrative purposes only. Index is not available for direct investment. Performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results.}

^{The information in this document is provided in good faith without any warranty and is intended for the recipient’s background information only. It does not constitute investment advice, recommendation, or an offer of any services or products for sale and is not intended to provide a sufficient basis on which to make an investment decision. It is the responsibility of any persons wishing to make a purchase to inform themselves of and observe all applicable laws and regulations. Unauthorized copying, reproducing, duplicating, or transmitting of this document are strictly prohibited. Dimensional accepts no responsibility for loss arising from the use of the information contained herein.}

^{“Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., Dimensional Ireland Limited, DFA Australia Limited, Dimensional Fund Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd., Dimensional Japan Ltd., and Dimensional Hong Kong Limited. Dimensional Hong Kong Limited is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.}

^{UNITED STATES: Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.}

^{Investment products: • Not FDIC Insured • Not Bank Guaranteed • May Lose Value
Dimensional Fund Advisors does not have any bank affiliates.}

^{CANADA: These materials have been prepared by Dimensional Fund Advisors Canada ULC. Commissions, trailing commissions, management fees, and expenses all may be associated with mutual fund investments. Unless otherwise noted, any indicated total rates of return reflect the historical annual compounded total returns, including changes in share or unit value and reinvestment of all dividends or other distributions, and do not take into account sales, redemption, distribution, or optional charges or income taxes payable by any security holder that would have reduced returns. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.}

^{AUSTRALIA and NEW ZEALAND: This material is issued by DFA Australia Limited (AFS License No. 238093, ABN 46 065 937 671). This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person. Accordingly, to the extent this material constitutes general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. Investors should also consider the Product Disclosure Statement (PDS) and the target market determination (TMD) that has been made for each financial product either issued or distributed by DFA Australia Limited prior to acquiring or continuing to hold any investment. Go to au.dimensional.com/funds to access a copy of the PDS or the relevant TMD. Any opinions expressed in this material reflect our judgement at the date of publication and are subject to change.}

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Neither Dimensional Ireland Limited (DIL) nor Dimensional Fund Advisors Ltd. (DFAL), as applicable (each an “Issuing Entity,” as the context requires), give financial advice. You are responsible for deciding whether an investment is suitable for your personal circumstances, and we recommend that a financial adviser helps you with that decision.}

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^{DFAL issues information and materials in English and may also issue information and materials in certain other languages. The recipient’s continued acceptance of information and materials from DFAL will constitute the recipient’s consent to be provided with such information and materials, where relevant, in more than one language.}

^{RISKS
Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original value. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful.}

^{JAPAN
Provided for institutional investors only. This document is deemed to be issued by Dimensional Japan Ltd., which is regulated by the Financial Services Agency of Japan and is registered as a Financial Instruments Firm conducting Investment Management Business and Investment Advisory and Agency Business. This material is solely for informational purposes only and shall not constitute an offer to sell or the solicitation to buy securities or enter into investment advisory contracts. The material in this article and any content contained herein may not be reproduced, copied, modified, transferred, disclosed, or used in any way not expressly permitted by Dimensional Japan Ltd. in writing. All expressions of opinion are subject to change without notice.}

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Membership: Japan Investment Advisers Association}

^{FOR PROFESSIONAL INVESTORS IN HONG KONG.
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^{This advertisement has not been reviewed by the Monetary Authority of Singapore. This information should not be considered investment advice or an offer of any security for sale. All information is given in good faith without any warranty and is not intended to provide professional, investment, or any other type of advice or recommendation and does not take into account the particular investment objectives, financial situation, or needs of individual recipients. Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances and, if appropriate, seek professional advice. Dimensional Fund Advisors Pte. Ltd. does not accept any responsibility and cannot be held liable for any person’s use of or reliance on the information and opinions contained herein. Neither Dimensional Fund Advisors Pte. Ltd. nor its affiliates shall be responsible or held responsible for any content prepared by financial advisors.}

11/12/2021
https://my.dimensional.com/all-time-high-anxiety

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KEY TAKEAWAYS

• As interest in ESG investing grows, so too do the ways in which it is measured and reported.
• ESG ratings providers frequently disagree on company ratings. Because ESG ratings often look at dozens of variables, and because detailed methodologies and score attributions are generally not publicly available, understanding where discrepancies come from can be challenging.
• Given the subjectivity inherent in ESG ratings, we believe they should be viewed not as objective ratings, but as opinions.
• Rather than using generic ESG ratings, investors should first identify which specific ESG considerations are most important to them, then choose an investment strategy accordingly.

The volume of sustainability data is growing fast. Greenhouse gas emissions, for example, are now reported or estimated for almost all public companies. This is great news for investors who want to allocate to companies based on their carbon footprints.

Beyond emissions data, the increase in broader company sustainability information can present meaningful challenges. For example, corporate sustainability reports may run a hundred pages long, differ substantially from one company to the next, and may not contain all the information that interests investors. As a result, it is only natural for investors to look for help in deciphering environmental, social, and governance (ESG) data.

THE ESG RATINGS SHORTCUT

At first, ESG ratings may appear a promising tool to navigate this complexity. Providers of ESG ratings may look at hundreds of reported and estimated variables for a single company and boil them down into a single ESG rating. Individual company ratings may then be aggregated into fund and index ratings or scores. Thanks to their convenience, ESG ratings have grown in popularity in recent years.

Globally, regulators have expressed caution. For example, in 2020, then-SEC Chairman Jay Clayton stated that he has “not seen circumstances where combining an analysis of E, S, and G together, across a broad range of companies, for example with a ‘rating’ or ‘score,’ particularly a single rating or score, would facilitate meaningful investment analysis that was not significantly over-inclusive and imprecise.”

INHERENT SUBJECTIVITY

Beauty is in the eye of the beholder. Often, so too is sustainability. ESG ratings providers frequently disagree on company ratings. The correlation between the ESG scores of different ESG ratings providers has been estimated at 0.54, and even lower when looking at the individual E, S, and G pillars. It is common for a company to be identified as best-in-class by one provider and as just average by another provider. In comparison, the correlation in the credit ratings assigned by Moody’s and S&P is 0.99. These findings are consistent with Dimson, Marsh, and Staunton (2020). Exhibit 1, reproduced from Boffo and Patalano (2020), shows some examples of companies with a high level of disagreement.

^{Source: Boffo, R., and R. Patalano (2020), “ESG Investing: Practices, Progress and Challenges”, OECD Paris, https://www.oecd.org/finance/ESG-Investing-Practices-Progress-Challenges.pdf Note: Sample of public companies selected by largest market capitalization as to represent different industries in the United States. The ESG ratings are transformed using a projection to the scale from 0 to 100, where 0 represents the lowest rating and 100 the highest rating. The issuer credit ratings are transformed using a projection to the scale from 0 to 20, where 0 represents the lowest rating (C/D) and 20 the highest rating (Aaa/AAA). Sources: Refinitiv, Bloomberg, MSCI, Yahoo finance, Moody’s, Fitch, S&P, and OECD calculations.}

^{Disclosure: Values range between -1 (strong negative relationship) and +1 (strong positive relationship). Values at or close to zero imply a weak or no linear relationship. Correlation coefficient values less than +0.8 or greater than -0.8 are not considered significant.}

The sources of dispersion across ESG ratings include differences in what is measured, how it is measured, and what weight is assigned to each variable. Because ESG ratings often look at dozens of variables, and because detailed methodologies and score attributions are generally not publicly available, understanding where discrepancies come from can be challenging.

This complexity means that ESG ratings may not be effective at achieving, and sometimes even work against, the sustainability objectives of investors. A recent OECD study found a low correlation between the ESG scores and the E pillar scores of three rating providers. Even less intuitively, it also found a positive correlation between the E pillar scores and carbon emissions for two out of the three providers. In other words, a strong environmental rating was associated with emitting more, not less. Dimensional’s research has also uncovered a statistic that may give environmentally minded investors pause. A key finding in our 2021 study notes that “sustainability” funds vary greatly in reducing exposure to greenhouse gas (GHG) emissions, as one in four US-domiciled “sustainability” branded funds reduce greenhouse gas emissions exposure by only 11% or less compared to the Russell 3000’s emissions exposure.

Overall, given the subjectivity inherent in ESG ratings, we believe they should be viewed not as objective ratings, but as opinions—not unlike the buy/hold/sell opinions that have been issued by sell-side analysts for decades. When using ESG ratings from one provider to allocate assets, investors should be aware that other ratings providers may have dramatically different opinions and ratings.

For example, indices based on ESG ratings may deviate significantly from one another. As of the end of March 2021, the MSCI World SRI Index,¹ which emphasizes companies with strong ESG ratings, assigned a weight of more than 12% to Microsoft—nearly four times its market capitalization weight—but excluded Apple and Alphabet. By contrast, in the FTSE Developed ESG Index,² all three companies were overweighted. It is important that investors understand how these investment decisions are arrived at—but the opacity, complexity, and subjectivity of ESG ratings methodologies may make this understanding difficult to achieve.

FROM ESG DATA TO ROBUST STRATEGIES

Rather than using generic ESG ratings, investors should first identify which specific ESG considerations are most important to them, and then choose an investment strategy accordingly. An example may be reducing exposure to companies with high emissions intensity. The broader the set of objectives, the more difficult it can be to manage the interactions among them. A “kitchen sink” approach that integrates dozens of variables may make it hard for investors to understand a portfolio’s allocations and may lead to unintended outcomes.

Investors should then take a close look at the data. Not all ESG data are created equal, and certain disclosures are more reliable and robust than others. For instance, data that rely on voluntary surveys may inadvertently favor large companies with well-staffed reporting teams, regardless of their actual ESG performance. Equally important is the ability of managers and fiduciaries to deliver meaningful sustainability reporting to their clients. Investment professionals should be confident that the ESG data they use can support the value proposition they seek to deliver to their clients.

This essay also appeared in Wealth Management.

<sup>1. MSCI data © MSCI 2021, all rights reserved.
2. FTSE indices © 2021 FTSE International Limited. All rights reserved.</sup>

^{The information in this document is provided in good faith without any warranty and is intended for the recipient’s background information only. It does not constitute investment advice, recommendation, or an offer of any services or products for sale and is not intended to provide a sufficient basis on which to make an investment decision. It is the responsibility of any persons wishing to make a purchase to inform themselves of and observe all applicable laws and regulations. Unauthorized copying, reproducing, duplicating, or transmitting of this document are strictly prohibited. Dimensional accepts no responsibility for loss arising from the use of the information contained herein.}

^{“Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., Dimensional Ireland Limited, DFA Australia Limited, Dimensional Fund Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd., Dimensional Japan Ltd., and Dimensional Hong Kong Limited. Dimensional Hong Kong Limited is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.}

^{UNITED STATES: Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.}

^{Investment products: • Not FDIC Insured • Not Bank Guaranteed • May Lose Value
Dimensional Fund Advisors does not have any bank affiliates.}

^{CANADA: These materials have been prepared by Dimensional Fund Advisors Canada ULC. Commissions, trailing commissions, management fees, and expenses all may be associated with mutual fund investments. Unless otherwise noted, any indicated total rates of return reflect the historical annual compounded total returns, including changes in share or unit value and reinvestment of all dividends or other distributions, and do not take into account sales, redemption, distribution, or optional charges or income taxes payable by any security holder that would have reduced returns. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.}

^{AUSTRALIA and NEW ZEALAND: This material is issued by DFA Australia Limited (AFS License No. 238093, ABN 46 065 937 671). This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person. Accordingly, to the extent this material constitutes general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. Investors should also consider the Product Disclosure Statement (PDS) and the target market determination (TMD) that has been made for each financial product either issued or distributed by DFA Australia Limited prior to acquiring or continuing to hold any investment. Go to au.dimensional.com/funds to access a copy of the PDS or the relevant TMD. Any opinions expressed in this material reflect our judgement at the date of publication and are subject to change.}

^{WHERE ISSUED BY DIMENSIONAL IRELAND LIMITED OR DIMENSIONAL FUND ADVISORS LTD.
Neither Dimensional Ireland Limited (DIL) nor Dimensional Fund Advisors Ltd. (DFAL), as applicable (each an “Issuing Entity,” as the context requires), give financial advice. You are responsible for deciding whether an investment is suitable for your personal circumstances, and we recommend that a financial adviser helps you with that decision.}

^{NOTICE TO INVESTORS IN SWITZERLAND: This is an advertising document.}

^{WHERE ISSUED BY DIMENSIONAL IRELAND LIMITED
Issued by Dimensional Ireland Limited (DIL), with registered office 10 Earlsfort Terrace, Dublin 2, D02 T380, Ireland. DIL is regulated by the Central Bank of Ireland (Registration No. C185067). Information and opinions presented in this material have been obtained or derived from sources believed by DIL to be reliable, and DIL has reasonable grounds to believe that all factual information herein is true as at the date ofthis document.}

^{DIL issues information and materials in English and may also issue information and materials in certain other languages. The recipient’s continued acceptance of information and materials from DIL will constitute the recipient’s consent to be provided with such information and materials, where relevant, in more than one language.}

^{WHERE ISSUED BY DIMENSIONAL FUND ADVISORS LTD.
Issued by Dimensional Fund Advisors Ltd. (DFAL), 20 Triton Street, Regent’s Place, London, NW1 3BF. DFAL is authorised and regulated by the Financial Conduct Authority (FCA). Information and opinions presented in this material have been obtained or derived from sources believed by DFAL to be reliable, and DFAL has reasonable grounds to believe that all factual information herein is true as at the date of this document.}

^{DFAL issues information and materials in English and may also issue information and materials in certain other languages. The recipient’s continued acceptance of information and materials from DFAL will constitute the recipient’s consent to be provided with such information and materials, where relevant, in more than one language.}

^{RISKS
Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original value. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful.}

^{JAPAN
Provided for institutional investors only. This document is deemed to be issued by Dimensional Japan Ltd., which is regulated by the Financial Services Agency of Japan and is registered as a Financial Instruments Firm conducting Investment Management Business and Investment Advisory and Agency Business. This material is solely for informational purposes only and shall not constitute an offer to sell or the solicitation to buy securities or enter into investment advisory contracts. The material in this article and any content contained herein may not be reproduced, copied, modified, transferred, disclosed, or used in any way not expressly permitted by Dimensional Japan Ltd. in writing. All expressions of opinion are subject to change without notice.}

^{Dimensional Japan Ltd.
Director of Kanto Local Finance Bureau (FIBO) No. 2683
Membership: Japan Investment Advisers Association}

^{FOR PROFESSIONAL INVESTORS IN HONG KONG.
This material is deemed to be issued by Dimensional Hong Kong Limited (CE No. BJE760) (“Dimensional Hong Kong”), which is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.}

^{This material should only be provided to “professional investors” (as defined in the Securities and Futures Ordinance [Chapter 571 of the Laws of Hong Kong] and its subsidiary legislation) and is not for use with the public. This material is not directed to any person in any jurisdiction where (by reason of that person’s nationality, residence, or otherwise) the publication or availability of this material are prohibited or which would subject Dimensional Hong Kong (including its affiliates) or any of Dimensional Hong Kong’s products or services to any registration, licensing, or other such legal requirements within such jurisdiction or country. When provided to prospective investors, this material forms part of, and must be provided together with, applicable fund offering materials. This material must not be provided to prospective investors on a standalone basis. Before acting on any information in this material, you should consider whether it is suitable foryour particular circumstances and, if appropriate, seek professional advice.}

^{Unauthorized copying, reproducing, duplicating, or transmitting of this material are prohibited. This material and the distribution of this material are not intended to constitute and do not constitute an offer or an invitation to offer to the Hong Kong public to acquire, dispose of, subscribe for, or underwrite any securities, structured products, or related financial products or instruments nor investment advice thereto. Any opinions and views expressed herein are subject to change. Neither Dimensional Hong Kong nor its affiliates shall be responsible or held responsible for any content prepared by financial advisors. Financial advisors in Hong Kong shall not actively market the services of Dimensional Hong Kong or its affiliates to the Hong Kong public.}

^{SINGAPORE
This material is deemed to be issued by Dimensional Fund Advisors Pte. Ltd., which is regulated by the Monetary Authority of Singapore and holds a capital markets services license for fund management.}

^{This advertisement has not been reviewed by the Monetary Authority of Singapore. This information should not be considered investment advice or an offer of any security for sale. All information is given in good faith without any warranty and is not intended to provide professional, investment, or any other type of advice or recommendation and does not take into account the particular investment objectives, financial situation, or needs of individual recipients. Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances and, if appropriate, seek professional advice. Dimensional Fund Advisors Pte. Ltd. does not accept any responsibility and cannot be held liable for any person’s use of or reliance on the information and opinions contained herein. Neither Dimensional Fund Advisors Pte. Ltd. nor its affiliates shall be responsible or held responsible for any content prepared by financial advisors.}  

11/12/2021
https://my.dimensional.com/do-esg-ratings-get-high-marks

The post Do ESG Ratings Get High Marks? appeared first on The Planning Center.

Amber Miller, Sr. Financial Planner at our Twin Cities office discusses the trend of Gen X and Y’s seeking out female financial advisors in an interview with ThinkAdvisor.

Amber Miller, CFP®, CSRIC is a Sr. Financial Planner in the Twin Cities office of The Planning Center, a fee-only financial planning and wealth management firm. Email her at  amber@theplanningcenter.com.

The post Why Many Young Couples Seek Out Female Financial Advisors appeared first on The Planning Center.

Caleb Arringdale, TPC Tax Advisor, recently presented “Simplifying Tax Planning for Retirees” as part of the Expedition to Retirement webinar series.
To watch this informative webinar, complete the below information to receive access

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While not the only (or even most important) aspect of a financial planner’s value proposition, portfolio management services may be the most visible to clients.  There are a couple of great articles from TPC advisors such as Andrew Sivertsen’s blog describing TPC’s investment philosophy, and Andy Baxley’s blog that discusses the process by which we help each client assess their risk tolerance, to highlight but a few. Each deals with an important stage of putting together an individual investment approach. With the foundational work outlined in those articles complete, we then begin the process of matching various aspects of your overall portfolio to your goals and objectives. 

We tend to talk and think about a “portfolio” as a pool of financial assets with a common investment objective. In reality that’s not usually the case.  While the term “portfolio” may ubiquitously describe the sum of your investment parts, the distinct components often have very different purposes.  Many clients are investing towards multiple goals, and each requires independent examination. 

Take, for example, the professional couple raising 2 kids while finding a balance between work and life.  They may be thinking about education planning, retirement planning, buying a house (or a second property), establishing an emergency fund, and funding a lifestyle of travel and experiences along the way.  With so many competing interests for each available dollar, we would be hard-pressed to have a uniform approach to saving for each goal.  We work with you to consider several factors, including:

• Time Horizon- the amount of time between when one begins saving, and when the goal is to be achieved, weighs heavily on how to invest that “pool” of money.  In the scenario above the young couple may have decades before retirement, and can afford to take on a higher level of risk related to that aspect of the portfolio, at least for now.  Even with market fluctuations, they should have ample time to allow their money to work on their behalf. Alternatively, if they’d like to purchase a house within the next five years they will need to build a fund for the down payment.  Common sense tells us that a high-risk portfolio for money needed in such a relatively short period may require a different approach.
• Risk Tolerance/Prudence- I strongly encourage you to read Andy Baxley’s article (referenced above) on how we think about your risk tolerance.  While often related to time horizon, some clients are simply unwilling to take the same risks while saving for different goals.  Emergency reserves are a great example- as difficult as it might be to see low yields on bank savings, the dollars allocated to this goal are purely designed to sustain cash flow in case of a job loss or to pay larger bills that are expected but hard to anticipate with respect to timing.  Taking the same level of risk with your emergency fund as you would with your retirement savings lacks prudence, even though there’s no specific end date for the potential need.
• Priority- Developing a sound investment philosophy isn’t just about how dollars are invested once they reach a specific account, but also about how to allocate dollars to reach your various goals. Discretionary cash flow is rarely infinite, and you often have to prioritize to which goals you’ll allocate monthly savings. For now, you might choose to focus on the education planning goal, or the goal to establish your emergency reserves.  While not necessarily or entirely at the expense of longer-term goals, these short(er) term goals can often benefit from immediate attention.  We’ll have discussions regularly about progress towards specific goals, and when it’s time to shift priority away from one goal and towards another. 

It’s very difficult to meet your investment needs with a “one size fits all” or “set it and forget it” approach.  And with your goals evolving, even an agreed-upon approach today may require adjustments and tweaks tomorrow.  This is yet another example of financial planning as an ongoing process, not a one-time project or product completed in a snap-shot of time. Work with your planner to review your goals often, and to ensure the correlating dollars allocated to those goals are still appropriately invested and prioritized given the information at hand.  

Michael Branham, CFP® is a Sr. Financial Planner in the Alaska office of The Planning Center, a fee-only financial planning and wealth management firm. Email him at mike@theplanningcenter.com.

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When looking under the hood of your investment portfolio, you will notice three practices working together to add value to your portfolio.

• Aligning your allocation to your risk tolerance and goals
• Rebalancing
• Market Pricing Adjustment

Aligning Your Allocation to Your Risk Tolerance and Goals

One of the first steps in building a portfolio that’s best for you is evaluating your risk profile. Just because you’re a daredevil that jumps motorcycles over buses, doesn’t mean that you would feel comfortable with a high-risk/return portfolio. Every individual has their own risk profile.  We use psychometric questionnaires to help have the conversation on what is a comfortable amount of risk for each individual.

The second step in aligning an allocation is assessing your goals and needs.  Answering the questions of “how much risk is needed?” and “how much risk might jeopardize a plan?” is a critical conversation when selecting an allocation. Through Monte Carlo simulation software, we can help you see various outcomes of a particular allocation with historical market returns, best-case, and worse -case, scenarios. 

Going through these steps help make a decision on a baseline portfolio split of stocks and bonds.

Rebalancing

Once a decision is made on baseline portfolio, we can implement tools to help monitor and adjust the portfolio when opportunities arise. We utilize a methodology called opportunistic rebalancing to capitalize on short term market swings. By establishing a 20% tolerance band around each asset class, we can allow the asset in the portfolio to float until it hits the band.  Then we will buy and sell as needed. The theory comes from the old adage: buy low and sell high.

Market Pricing Adjustment

By comparing what investors are currently paying for stocks to what they have historically paid for stocks, we can evaluate the current pricing of the market.  This can help give perspective on current market conditions based on objective data rather than speculation or guessing.  We can then make adjustments to the portfolio in 5% increments up or down based on the pricing of the markets.

Summary

Implementing these tools creates a process for making decisions around your portfolio without relying on behavior or emotions. These tools and practices can add value and protect your portfolio. If you are interested in learning more about our investment philosophy and tools, contact TPC or your TPC Financial Planner to set up a meeting.

Matt Knoll, CFP®,, is a Sr. Financial Planner in the Quad Cities office of The Planning Center, a fee-only financial planning and wealth management firm. Email him at mattk@theplanningcenter.com.

The post Trading Tools and Practices That Add Value to Your Portfolio appeared first on The Planning Center.

Rebalancing can help investors maintain an asset allocation that aligns with their needs, goals, and risk tolerances. The appropriate approach to rebalancing depends on where an investor sits in the tradeoff between rebalancing costs1 and deviations from the target asset allocation. Evaluating an array of rebalancing methods using four decades of historical data, our recent study “Portfolio Rebalancing: Tradeoffs and Decisions” suggests that rebalancing approaches that deviate from calendar-based trading and instead base rebalancing decisions on portfolio composition may produce better tradeoffs for investors.

WEIGHING YOUR OPTIONS

Reducing rebalancing costs and minimizing deviations from a target allocation represent conflicting goals. More frequent rebalancing may keep a portfolio tightly aligned with its target but at the cost of greater turnover. Less frequent rebalancing may lower costs but lead to larger tracking deviations.

Exhibit 1 illustrates this tradeoff. For a US 60/40 portfolio from 1979 to 2019, rebalancing quarterly produced about twice the turnover—our proxy for rebalancing costs—of rebalancing annually. But with that higher cost came a much lower tracking deviation from the target 60/40 allocation—less than half that experienced with annual rebalancing. Exhibit 1 also shows that calendar-based approaches, while convenient, tend to lead to less efficient rebalancing tradeoffs—higher turnover for a given level of tracking error and vice versa—compared to rebalancing with tolerance bands. As detailed in our paper, further improvements can be gained with tiered approaches that apply different tolerance bands across and within asset classes.

In evaluating how rebalancing choices may impact a portfolio’s short-term performance, we find that less frequent rebalancing does not necessarily lead to higher maximum drawdowns. However, rebalancing less frequently can lead to meaningful short-term return differences relative to the target asset allocation. Our results show that the range of tracking error across rebalancing approaches is wider for portfolios with larger equity allocations, suggesting that investors sensitive to tracking error should be particularly mindful when choosing rebalancing approaches if their portfolios have high allocations to equities.

When choosing between investing in an integrated portfolio solution and investing in a portfolio with many components, investors should take into account rebalancing costs; a multicomponent portfolio can incur meaningfully higher costs due to rebalancing, but with little expected difference in returns compared to an integrated portfolio with otherwise similar characteristics.

Furthermore, we do not find evidence that rebalancing choices can reliably increase expected returns. Realized return differences across rebalancing approaches are typically due to style drift. For example, more frequent rebalancing tends to reduce returns because rebalancing tends to reduce the allocation to asset classes with higher expected returns. However, if a greater allocation to higher-expected-return asset classes was appropriate, it should be reflected in the target allocation. Noise in returns can also impact the realized return outcomes of different rebalancing approaches, suggesting that investors should avoid choosing a rebalancing method based solely on historical returns.

There are no one-size-fits-all, universally optimal rebalancing approaches. Our recent paper provides a framework that can help investors strike the right balance between minimizing rebalancing costs and keeping a better focus on their investment objectives, which may better position them to capture what the market has to offer.

VIEW THE RESEARCH ON SSRN

^{GLOSSARY
Tolerance bands: A percentage range around a portfolio’s target allocation that determines when to rebalance a portfolio. Rebalancing occurs if the weight of any portfolio component deviates from its target weight by more than the specified tolerance. For example, with a 5% tolerance band, a portfolio targeting 60% in equities and 40% in fixed income is rebalanced if the portfolio weight of equities either exceeds 65% or falls below 55%.
Tracking error: A measure used to quantify how closely a portfolio follows an index or benchmark, often defined as the standard deviation of the difference between the portfolio and index returns.}

^{1. Rebalancing costs can take various forms and include explicit and implicit costs. Even in a market environment where many exchange-traded funds (ETFs) are traded with zero transaction fees, rebalancing can be costly for investors due to ETF spreads, taxes, and monitoring costs.}

^{The information in this document is provided in good faith without any warranty and is intended for the recipient’s background information only. It does not constitute investment advice, recommendation, or an offer of any services or products for sale and is not intended to provide a sufficient basis on which to make an investment decision. It is the responsibility of any persons wishing to make a purchase to inform themselves of and observe all applicable laws and regulations. Unauthorized copying, reproducing, duplicating, or transmitting of this document are strictly prohibited. Dimensional accepts no responsibility for loss arising from the use of the information contained herein.}

^{“Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., Dimensional Ireland Limited, DFA Australia Limited, Dimensional Fund Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd., Dimensional Japan Ltd., and Dimensional Hong Kong Limited. Dimensional Hong Kong Limited is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.}

^{UNITED STATES: Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.}

^{Investment products: • Not FDIC Insured • Not Bank Guaranteed • May Lose Value
Dimensional Fund Advisors does not have any bank affiliates.}

^{CANADA: These materials have been prepared by Dimensional Fund Advisors Canada ULC. Commissions, trailing commissions, management fees, and expenses all may be associated with mutual fund investments. Unless otherwise noted, any indicated total rates of return reflect the historical annual compounded total returns, including changes in share or unit value and reinvestment of all dividends or other distributions, and do not take into account sales, redemption, distribution, or optional charges or income taxes payable by any security holder that would have reduced returns. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.}

^{AUSTRALIA and NEW ZEALAND: This material is issued by DFA Australia Limited (AFS License No. 238093, ABN 46 065 937 671). This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person. Accordingly, to the extent this material constitutes general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. Investors should also consider the Product Disclosure Statement (PDS) and the target market determination (TMD) that has been made for each financial product either issued or distributed by DFA Australia Limited prior to acquiring or continuing to hold any investment. Go to au.dimensional.com/funds to access a copy of the PDS or the relevant TMD. Any opinions expressed in this material reflect our judgement at the date of publication and are subject to change.}

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Neither Dimensional Ireland Limited (DIL) nor Dimensional Fund Advisors Ltd. (DFAL), as applicable (each an “Issuing Entity,” as the context requires), give financial advice. You are responsible for deciding whether an investment is suitable for your personal circumstances, and we recommend that a financial adviser helps you with that decision.}

^{NOTICE TO INVESTORS IN SWITZERLAND: This is an advertising document.}

^{WHERE ISSUED BY DIMENSIONAL IRELAND LIMITED
Issued by Dimensional Ireland Limited (DIL), with registered office 10 Earlsfort Terrace, Dublin 2, D02 T380, Ireland. DIL is regulated by the Central Bank of Ireland (Registration No. C185067). Information and opinions presented in this material have been obtained or derived from sources believed by DIL to be reliable, and DIL has reasonable grounds to believe that all factual information herein is true as at the date of this document.}

^{DIL issues information and materials in English and may also issue information and materials in certain other languages. The recipient’s continued acceptance of information and materials from DIL will constitute the recipient’s consent to be provided with such information and materials, where relevant, in more than one language.}

^{WHERE ISSUED BY DIMENSIONAL FUND ADVISORS LTD.
Issued by Dimensional Fund Advisors Ltd. (DFAL), 20 Triton Street, Regent’s Place, London, NW1 3BF. DFAL is authorised and regulated by the Financial Conduct Authority (FCA). Information and opinions presented in this material have been obtained or derived from sources believed by DFAL to be reliable, and DFAL has reasonable grounds to believe that all factual information herein is true as at the date of this document.}

^{DFAL issues information and materials in English and may also issue information and materials in certain other languages. The recipient’s continued acceptance of information and materials from DFAL will constitute the recipient’s consent to be provided with such information and materials, where relevant, in more than one language.}

^{RISKS
Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original value. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful.}

^{JAPAN
Provided for institutional investors only. This document is deemed to be issued by Dimensional Japan Ltd., which is regulated by the Financial Services Agency of Japan and is registered as a Financial Instruments Firm conducting Investment Management Business and Investment Advisory and Agency Business. This material is solely for informational purposes only and shall not constitute an offer to sell or the solicitation to buy securities or enter into investment advisory contracts. The material in this article and any content contained herein may not be reproduced, copied, modified, transferred, disclosed, or used in any way not expressly permitted by Dimensional Japan Ltd. in writing. All expressions of opinion are subject to change without notice.}

^{Dimensional Japan Ltd.
Director of Kanto Local Finance Bureau (FIBO) No. 2683
Membership: Japan Investment Advisers Association}

^{FOR PROFESSIONAL INVESTORS IN HONG KONG.
This material is deemed to be issued by Dimensional Hong Kong Limited (CE No. BJE760) (“Dimensional Hong Kong”), which is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.}

^{This material should only be provided to “professional investors” (as defined in the Securities and Futures Ordinance [Chapter 571 of the Laws of Hong Kong] and its subsidiary legislation) and is not for use with the public. This material is not directed to any person in any jurisdiction where (by reason of that person’s nationality, residence, or otherwise) the publication or availability of this material are prohibited or which would subject Dimensional Hong Kong (including its affiliates) or any of Dimensional Hong Kong’s products or services to any registration, licensing, or other such legal requirements within such jurisdiction or country. When provided to prospective investors, this material forms part of, and must be provided together with, applicable fund offering materials. This material must not be provided to prospective investors on a standalone basis. Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances and, if appropriate, seek professional advice.}

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^{This advertisement has not been reviewed by the Monetary Authority of Singapore. This information should not be considered investment advice or an offer of any security for sale. All information is given in good faith without any warranty and is not intended to provide professional, investment, or any other type of advice or recommendation and does not take into account the particular investment objectives, financial situation, or needs of individual recipients. Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances and, if appropriate, seek professional advice. Dimensional Fund Advisors Pte. Ltd. does not accept any responsibility and cannot be held liable for any person’s use of or reliance on the information and opinions contained herein. Neither Dimensional Fund Advisors Pte. Ltd. nor its affiliates shall be responsible or held responsible for any content prepared by financial advisors.}

10/19/2021
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We’ve learned a lot about investing over the past 60 years, a period that has seen many breakthroughs in the world of finance. What we know comes from studying public markets and is grounded in serious academic research. The lessons are clear: Investing in markets is an excellent plan for meeting long-term goals, like maximizing your retirement income. When you develop a deeper understanding of public markets, you can cultivate a sense of optimism about investing.

Two ideas are at the heart of embracing this approach:

First, markets provide a way for both sides to win. In order to trade, both buyer and seller have to agree on a price. If either side felt the price wasn’t meeting his or her needs, they wouldn’t trade. This is what we mean when we say market prices are fair.

Second, markets allow all of us to invest in human ingenuity—and get paid for it. We want to help as many people as possible access what markets offer in investment opportunities and wealth generation so they can live better lives.

Even though the investment principles we run on are simple, they aren’t always easy to understand and accept. Many people struggle with some of the basic concepts behind long-term, highly diversified investing—it’s a matter of human nature.

Here are some of the objections I’ve encountered. I think most of us can relate to at least one of them.

1. “I DON’T SEE THE POINT OF INVESTING IN THE FIRST PLACE.”

Any decision you make with your money—even not investing—is an investment decision involving risk and rewards. You’re focused on the risk involved in investing. But what are you risking by not investing? You’re risking today’s money having less value in the future because of inflation. You’re missing out on the magic of compounding, which Albert Einstein is said to have described as the Eighth Wonder of the World. (Assuming an average 10% return, as the S&P 500 has returned historically, money invested in the stock market doubles every seven years.) You’re forgetting that diversification—spreading your investments across a large number of companies—is a powerful way to minimize risk. When it comes to personal goals, everything has a tradeoff. Most people don’t have enough money saved to be able to live adequately in retirement without earning some kind of investment return. In the simplest terms, by not investing, you risk outliving your money.

2. “I’M TOO LATE. THE TRAIN HAS LEFT THE STATION.”

It’s natural to feel regret about decisions you’re unsure about. But it’s never too late to invest. Every day, we expect the stock market to go up. Otherwise, investors would find other things to do with their money.

3. “WHEN IT COMES TO INVESTMENT ADVICE, I DON’T KNOW WHO I’M SUPPOSED TO TRUST.”

Here’s the good news: You don’t have to “trust” anyone. Just trust the market. No human being can tell you more than the market has already told you through setting prices. Markets are always reacting to new information in real time. Anything you hear a pundit say on TV or read on an internet message board is yesterday’s news. And it may seem obvious, but you have to remember: There’s a difference between fact and opinion. Cultivate a healthy sense of skepticism when it comes to financial punditry, and remember that it’s not news, but entertainment. And if you need a trustworthy sounding board, consider meeting with an independent financial advisor, whose interests are aligned with your own.

4. “IT’S TOO HARD TO FIGURE OUT WHEN TO GET INTO—OR OUT OF—THE MARKET.”

Human beings have a natural urge to transact. But getting into and out of the market is gambling, not investing. If you treat the market like a casino, and you’re picking stocks or attempting to time the market, you need to be right twice—in an aim to buy low and sell high. Fortunately, you don’t need to time the market to have a good investment experience. Professor Eugene Fama, a Nobel laureate in economic sciences, showed that it’s unlikely for any individual to be able to pick the right stock at the right time—especially more than once.¹  Once you decide to be a long-term investor, the timing debate is off the table. And that’s a big relief. When you buy the whole market, you’re investing in human ingenuity to find productive solutions to the world’s problems.

5. “I’M AFRAID I’M GOING TO LOSE IT ALL.”

If you’re lucky enough to live a long time, you’ll face big market downturns. You’re much more likely to “lose it all” with concentrated investments than with a well-diversified portfolio. Individual investments may go to zero, but the modern-day market has been around for almost a century, has an average annual return of 10%, and has never lost more than 43% in a year.²

6. “I DON’T KNOW WHAT I DON’T KNOW, AND THAT MAKES ME NERVOUS.”

It’s OK to be nervous! If investing were a slam dunk, there wouldn’t be a positive expected payoff. In order for an investment to offer the possibility of a return above money-market funds, it needs to carry risk. And when it comes to deciding how to grow your hard-earned money, the stakes are high. Uncertainty is scary, but without uncertainty, there would be no opportunity. Stock market behavior is uncertain, just like most things in our lives. None of us can make uncertainty disappear, but dealing thoughtfully with uncertainty can make a huge difference in investment returns and quality of life. Your challenge is to stick with an established plan. A financial advisor can help.

7. “I ONLY WANT TO INVEST IN COMPANIES I’M FAMILIAR WITH.”

Stock markets contain all of the publicly traded companies out there. Every company has an incentive to do better. Investing in human potential across a broad range of companies is more likely to pay off than trying to predict which individual company is going to perform best. You can do well without having to outguess the market.

8. “I’M AFRAID THERE’S GOING TO BE ANOTHER FINANCIAL CRISIS.”

History shows us that there’s always going to be another financial crisis—and another recovery. Every crisis has a different cause, so it feels different every time, but the market has always delivered a positive return once things settle down. Crises, by definition, are not predictable. Markets are forward-looking and remind us of the power of human resilience.

9. “I’M OVERWHELMED. IT’S JUST TOO MUCH TO THINK ABOUT.”

Inertia is a powerful force. Thinking a little bit about it right now means worrying a lot less in the future. Inaction comes with a price, but this is where a financial advisor can really help.

10. “I DON’T HAVE ENOUGH MONEY TO INVEST.”

When it comes to investing for your family’s future, there is no minimum. The first and most important step toward investing is saving. It’s human nature to procrastinate. Half the battle is just getting started. This can mean “paying yourself first” by directing a small percentage of each paycheck into savings. Putting money aside regularly becomes a feel-good habit, like exercise. You can witness your own incremental progress and the boost in self-esteem it brings. You’ll be surprised by how easy it is to set this in motion, and you’ll feel good—for yourself, and your family. Just look at these numbers: If you invest $100 today and then $100 per month for 30 years with a 10% return, you’ll end up with almost $200,000.³

<sup>1. Eugene F. Fama and Kenneth R. French, “Luck versus Skill in the Cross-Section of Mutual Fund Returns,” Journal of Finance 65, no. 5 (2010): 1915–1947.
2. In US dollars. S&P 500 Index annual returns 1926–2020. S&P data © 2021 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved.
3. The performance reflects the growth of a hypothetical investment and assumes reinvestment of income and no transaction costs or taxes.</sup>

^{Eugene Fama is a member of the Board of Directors of the general partner of, and provides consulting services to, Dimensional Fund Advisors LP.}

^{Diversification neither assures a profit nor guarantees against loss in a declining market.}

^{The information in this document is provided in good faith without any warranty and is intended for the recipient’s background information only. It does not constitute investment advice, recommendation, or an offer of any services or products for sale and is not intended to provide a sufficient basis on which to make an investment decision. It is the responsibility of any persons wishing to make a purchase to inform themselves of and observe all applicable laws and regulations. Unauthorized copying, reproducing, duplicating, or transmitting of this document are strictly prohibited. Dimensional accepts no responsibility for loss arising from the use of the information contained herein.}

^{“Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., Dimensional Ireland Limited, DFA Australia Limited, Dimensional Fund Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd., Dimensional Japan Ltd., and Dimensional Hong Kong Limited. Dimensional Hong Kong Limited is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.}

^{UNITED STATES: Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.}

^{Investment products: • Not FDIC Insured • Not Bank Guaranteed • May Lose Value
Dimensional Fund Advisors does not have any bank affiliates.}

^{CANADA: These materials have been prepared by Dimensional Fund Advisors Canada ULC. Commissions, trailing commissions, management fees, and expenses all may be associated with mutual fund investments. Unless otherwise noted, any indicated total rates of return reflect the historical annual compounded total returns, including changes in share or unit value and reinvestment of all dividends or other distributions, and do not take into account sales, redemption, distribution, or optional charges or income taxes payable by any security holder that would have reduced returns. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.}

^{AUSTRALIA and NEW ZEALAND: This material is issued by DFA Australia Limited (AFS License No. 238093, ABN 46 065 937 671). This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person. Accordingly, to the extent this material constitutes general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. Investors should also consider the Product Disclosure Statement (PDS) and the target market determination (TMD) that has been made for each financial product either issued or distributed by DFA Australia Limited prior to acquiring or continuing to hold any investment. Go to au.dimensional.com/funds to access a copy of the PDS or the relevant TMD. Any opinions expressed in this material reflect our judgement at the date of publication and are subject to change.}

^{WHERE ISSUED BY DIMENSIONAL IRELAND LIMITED OR DIMENSIONAL FUND ADVISORS LTD.
Neither Dimensional Ireland Limited (DIL) nor Dimensional Fund Advisors Ltd. (DFAL), as applicable (each an “Issuing Entity,” as the context requires), give financial advice. You are responsible for deciding whether an investment is suitable for your personal circumstances, and we recommend that a financial adviser helps you with that decision.}

^{NOTICE TO INVESTORS IN SWITZERLAND: This is an advertising document.}

^{WHERE ISSUED BY DIMENSIONAL IRELAND LIMITED
Issued by Dimensional Ireland Limited (DIL), with registered office 10 Earlsfort Terrace, Dublin 2, D02 T380, Ireland. DIL is regulated by the Central Bank of Ireland (Registration No. C185067). Information and opinions presented in this material have been obtained or derived from sources believed by DIL to be reliable, and DIL has reasonable grounds to believe that all factual information herein is true as at the date of this document.}

^{DIL issues information and materials in English and may also issue information and materials in certain other languages. The recipient’s continued acceptance of information and materials from DIL will constitute the recipient’s consent to be provided with such information and materials, where relevant, in more than one language.}

^{WHERE ISSUED BY DIMENSIONAL FUND ADVISORS LTD.
Issued by Dimensional Fund Advisors Ltd. (DFAL), 20 Triton Street, Regent’s Place, London, NW1 3BF. DFAL is authorised and regulated by the Financial Conduct Authority (FCA). Information and opinions presented in this material have been obtained or derived from sources believed by DFAL to be reliable, and DFAL has reasonable grounds to believe that all factual information herein is true as at the date of this document.}

^{DFAL issues information and materials in English and may also issue information and materials in certain other languages. The recipient’s continued acceptance of information and materials from DFAL will constitute the recipient’s consent to be provided with such information and materials, where relevant, in more than one language.}

^{RISKS
Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original value. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful.}

^{JAPAN
Provided for institutional investors only. This document is deemed to be issued by Dimensional Japan Ltd., which is regulated by the Financial Services Agency of Japan and is registered as a Financial Instruments Firm conducting Investment Management Business and Investment Advisory and Agency Business. This material is solely for informational purposes only and shall not constitute an offer to sell or the solicitation to buy securities or enter into investment advisory contracts. The material in this article and any content contained herein may not be reproduced, copied, modified, transferred, disclosed, or used in any way not expressly permitted by Dimensional Japan Ltd. in writing. All expressions of opinion are subject to change without notice.}

^{Dimensional Japan Ltd.
Director of Kanto Local Finance Bureau (FIBO) No. 2683
Membership: Japan Investment Advisers Association}

^{FOR PROFESSIONAL INVESTORS IN HONG KONG.
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10/19/2021
https://my.dimensional.com/10-obstacles-to-investing-and-how-to-overcome-them

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