A cornerstone of Dimensional Funds research is the idea that there are higher expected returns within different asset classes also referred to as ‘Dimensions’ of return. For instance, it is widely understood that stocks should outperform bonds over the long-term. But what is less well known is this higher expected return can also be said about small stocks, value stocks & more profitable stocks. This long-term outperformance has been observed not just in US Markets but foreign as well, and just like stocks relative to bonds, we expect a higher return over the long run but recognize over short periods these excess returns may not be realized.
So how does Dimensional implement this research in the real world? Well, you can click the image above to watch a video explaining their implementation, but fair warning it’s the longest video of our series so you may want to get comfortable. We hope you find the information valuable and if you have any questions with it, please let us know!
*Past performance is no guarantee of future results