Dimensional Fund Advisors is known for its unique investment philosophy that focuses on market efficiency, diversification, and long-term investing. Their approach is laid out in several books published over the years. By reading these books, investors can gain valuable insights into the Dimensional philosophy and how to construct robust investment portfolios.
Emphasis on passive investing and efficient markets
The Dimensional philosophy firmly believes in efficient markets and passive investing strategies. Their approach seeks to capture market returns at low cost rather than trying to outguess the market. Books like The Dimensional Investor and Just Keep Buying explain the solid logic behind this principle and why active stock picking is unlikely to outperform.
Diversification and factor tilts
A core tenet of the Dimensional philosophy is broad diversification across asset classes and systematic factor tilts. Books like Philosophy in Dimensional Investing dive deep into the rationale for holding thousands of securities across markets and targeting factors like value, profitability and low volatility. This framework aims to provide more reliable returns over the long run.
Discipline and process over prediction
Dimensional books argue convincingly for discipline, process and humility in investing over confident market predictions. As Philosophy in Dimensional Investing explains, “No one can predict the future. The most any of us can do is thoughtfully position portfolios using theory, observation and experience as guides.” This viewpoint underlies Dimensional’s calm, structured approach to investing.
Long-term perspective
The Dimensional philosophy emphasizes a long investment horizon and patience even in challenging markets. Books like Just Keep Buying provide powerful examples of how investors can sabotage themselves by trying to time the market. By developing a long-term perspective and sticking to a sound asset allocation, Dimensional shows how to improve investment outcomes.
The unique Dimensional investment philosophy is devoted to passive investing, diversification, discipline and a long horizon. Their books offer deep insights for investors on constructing enduring portfolios.