Your Move, Bogleheads: Advisor Finds DFA’s Returns Trump Vanguard’s
As a user of Dimensional Fund Advisors’ low-cost value investing funds, it’s always interesting to see such headlines in the news. Here are a few quotes from the article:
“Equal-weighting the assets favored DFA, 12.8% to 10% (the time period differed from the Morningstar calculation because it included the most recent quarter). But asset-weighting the returns favored DFA more significantly (14.5% to 10.1%) since most DFA investors are heavily weighted to the small-cap and value funds on which DFA’s reputation is based.”
“Basically, at any point since 2000, the trailing 10-year performance of small value would have looked really good relative to the broad market… The peak was the 10 years ended 4/30/2010 where small value outperformed the market by 900 basis points annually. Of course, this was the reverse of the previous period. For the 10 years ended 3/31/2013, small value outperformed the broad market by 214 basis points annually.”
For those that don’t speak financial jargon, 1 basis point equals 0.01%, so 100 basis points=1%.
Chained CPI: Social Security Friend or Foe?
Chained CPI has been on the Social Security reform table for quite some time now. However, over the past few months there have been renewed calls for using chained CPI to reduce the liability of Social Security. Basically chained CPI is a reduction in the cost of living adjustments that Social Security beneficiaries receive each year so that they can maintain their purchasing power, which inflation erodes every year. On average most cost of living adjustments are in the 2-4% range. While that may not seem like a lot, the benefits compound over time, which is good for the beneficiary and bad for Social Security’s balance sheet.
Social Security is in need of some major reforms, however chained CPI is unlikely to contribute much in the way of a meaningful impact in the long run. However, if Chained CPI is passed, it’s all the more important that you maximize your Social Security, so that the base you start with is bigger. Sign up for my free Social Security maximization course via the form for Retirement Planning Academy on the right sidebar of the blog.
This article gives a nice overview of chained CPI for those that want to dig deeper.
“The “chained” label exists because the measure compares purchase patterns from one month to the next and thus chains them together for purposes of looking at consumers’ product-substitution decisions.”
Learning (and Rapping) About 401(k)s
The Boys And Girls Clubs of America and the Charles Schwab foundation sponsor a financial literacy program for teenagers called “Money Matters: Make It Count.” The program recently sponsored a music video contest, where contestants had to perform a rap about money and the importance of smart financial strategies. The winner, 15 year old Blake McGuire of Indianapolis won the contest (and the $1,000 scholarship that goes along with it) for his video “Money All That Matters.”
Online Shopping, With Sales Tax Added
For all of you that love online shopping as much as I do, it’s time to prepare to pay sales tax on your purchases. The “Marketplace Fairness Act” should be voted on by the Senate this week and then be sent over to the House. The act would require online companies to collect sales tax for the multitude of local and state districts that charge sales tax across the nation. The act excludes business with gross remote sales of $500,000 or less from having to collect taxes.