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Our Investment Beliefs

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by

Huw Jones

on 14 February 2014

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Transcript of Our Investment Beliefs

Our
Investment
Beliefs

Markets
are efficient

Diversification
reduces risk

Risk & Return
are related

Equities will
outperform
fixed income

Value & Small
tilts add value

Costs matter
5360.3
5350.3
Percentage of All Rolling Periods Where UK Small Outperformed UK Market
UK Small vs. UK Market
Monthly: March 1955–December 2011
5340.3
Percentage of All Rolling Periods Where UK Value Outperformed UK Market
UK Value vs. UK Market Monthly: July 1955–December 2011
5220.3
Size and Value Effects Are Strong around the World
Annual Data
Percent per Annum
5050.3
5420.3
Equity Fund Expenses
Global Equity Fund Expense Ratios
UK Equity Fund Expense Ratios
“After costs, the return on the average actively managed dollar will be less than the return on the average passively managed dollar for any time period.”
—William F. Sharpe, 1990 Nobel Laureate
5230.3
Size Premium
From year to year, stocks with high book-to-market ratios and smaller market caps do not always produce higher returns.
Over longer time periods, the size and value premiums are more prevalent.
Investors that maintained disciplined size and value exposure were ultimately rewarded.
Value Premium
Risk Factors Have Periods of Under- and Over-Performance
1957–2011
In GBP
5015.2
£3,021
Dimensional UK Small Cap Index
£21
UK Retail Price Index
£53
UK One Month Treasury Bills
£521
FTSE All-Share Index
£2,983
Dimensional UK Value Index
Growth of Wealth
January 1956–December 2011
5050.3
is the highest return for the year.
Source: MSCI developed markets country indices (net dividends) with at least 25 years of data. MSCI data copyright MSCI 2012, all rights reserved.
This material has been distributed by Dimensional Fund Advisors Ltd., which is authorised and regulated by the Financial Services Authority. Past performance is no guarantee of future results.
Equity Returns of Developed Markets
Annual Return (%)
In GBP
Boxed
Return
5050.3
Lowest
Return
Highest
Return
Equity Returns of Developed Markets
Annual Return (%)
In GBP
5360.3
Percentage of All Rolling Periods Where UK Market Outperformed UK One-Month T-Bills
UK Market vs. UK One-Month T-Bills
Monthly: February 1955–December 2011
Full transcript