Disaster at DFA

For over five years, this website has warned readers to avoid DFA funds and invest in Vanguard instead. We’ve pointed out the relatively high fees, poor performance, high risk, lower diversification, and less tax efficient nature of DFA versus Vanguard.

Hopefully you were paying attention in 2018, and dumped your DFA holdings before 2019 began – because failing to switch would have cost you a large amount of money.

Let’s look at the results for 2019. We’ll compare three funds:

Fund Symbol Strategy
Vanguard Total US Market VTSAX Total US stock market, market cap weighted.
DFA Vector Equity DFVEX Total US stock market, small/value weighted.
DFA Small Value DFSVX Small/value stocks only.

And here are the 2019 results:

Capturedfa14

The Vanguard fund rose 30.4% in 2019, the Vector Equity fund 25.7%, and the small value fund 17.8%. (this site measures returns through Dec 30, since that’s the date DFA’s Vector Equity and other total US stock market funds were created). Looked at another way, here are the gains on a $500k investment in each fund in 2019:

image003

That’s a stunning difference when you consider all three funds track the same asset class (stocks) in the same country. This, year, I’ve given DFA a break and not tacked on the 1% fee most investors have to pay their friendly DFA advisors for the privilege of owning these “elite” funds.

Note that the DFA Small Value fund isn’t directly comparable to the Vanguard fund, since it doesn’t cover the entire stock market. But DFVEX, which is a total US Stock market fund, is.

Critics will note that this is just one year – too short a period to draw any conclusions about the superiority of one fund versus another.  And so, once again, let’s show the complete, 14 year history of Vanguard vs DFA, since the DFA fund’s inception in 2005:

dfa14

Vanguard’s experienced 248.2% growth, versus 187.8% for DFA. Happy birthday, DFVEX. Here’s how that looks in dollar terms (once again I’ve assumed no DFA advisor fee):

image007

To be clear, the Vanguard fund simply represents all stocks in the US market, weighted by the size of each company. Investors pay DFA to outperform that passive index.

Once again this year, DFA company owners and their network of salespeople made a lot of money. And, once again, DFA investors underperformed.

A new year is upon us. Which company will you choose in 2020?

 

3 thoughts on “Disaster at DFA

  1. Interesting analysis. Given these facts and those presented by other news articles, I don’t know why you’d chose the (relative) newcomer DFA over established Vanguard, considering the fees extracted by the former company and its sales force.

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  2. You’re comparing apples to oranges. DFA funds have a value tilt. The Vanguard fund you used to compare the DFA fund with does not. Over that 14 year period of time value underperformed the broad market significantly, so of course you’d expect a total market fund to outperform value funds, If you want to make a apples to apples comparison, you need to use Vanguard value funds (large cap value and small cap value)

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