Portfolio goals

by David Booth, Executive Chairman and Founder, Dimensional Fund Advisors

By now, you’ve probably seen a few – or a few thousand – retrospectives on the past year and the past 10 years… with a few 20-year reflections thrown in.

Maybe it’s the nice, round New Year number. (Although technically, it may not be the dawn of a new decade until 2021.)

What a year it’s been. Remember December 2018? As The New York Times reported at the time, “Stocks plunged in December [2018], posting their worst monthly loss since the financial crisis and the worst December since 1931 and the Great Depression.”

The first decade of the 21st century, and the second one that's drawing to a close, have reinforced for investors some timeless market lessons: Returns can vary sharply from one period to another. Holding a broadly diversified portfolio can help smooth out the swings. Also, focusing on known drivers of higher expected returns can increase the potential for long-term success.

An Investment policy statement (IPS) is a statement that is a road map for you and your advisor in structuring your investments according to your goals. It spells out your investment goals and objectives, outlines the asset allocation targets, and the specific types of securities to be used with the expected risk/return profile of your portfolio.

We appreciate your following our five-part series on value investing. If you’ve made it this far, your journey is nearly complete.

There’s a misconception in the markets: value stocks have lost their vigor.

If we asked you to hold your breath or stop blinking, how long could you do it? A minute, maybe two?

Now, what if we asked how long you could go without being moved by the latest headline news? Impeachment unrest, Hong Kong protests, Brexit stress, climate change, inverted bond yields, the price of oil… you name it. There’s plenty to think about these days.

If you’ve been following our series on value investing so far, you may be wondering what other evidence we have considered with respect to the factor’s future viability.

Going Global

So far in our five-part series on value investing, we’ve explored the factor’s origins and proposed that evidence-based investors would be well-advised to keep the faith on value investing (relative to their personal financial goals and risk tolerances).