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3 investment strategies (and their key differences)

By Stuart Ritchie - November 15, 2018

When it comes to investing…

There are three strategies.

This is great for investors…

It means they can choose the one they’re most comfortable with.

But is your strategy really working for you?

Here’s a quick look at these different investment approaches…

Active Passive and Dimensional Final Proxim Final

Active investing is a guessing game…

Money managers pick the ‘winners’ for you.

However, finding the winning investment manager is a challenge.

And difficult to distinguish between those who are skilled…

And others who are lucky.

If you look at the stats over the years…

You’ll see the dismal number of active managers able to beat the market.

It’s this very revelation that led to the introduction of passive investing.

Contrary to active investing, it doesn’t try to beat the market.

And has no ‘expert’ managing your money.

Instead, it tries to capture the market return.

Active Passive and Dimensional Final Proxim Final V2

Despite being an easy and successful way to invest, Dimensional Fund Advisors (DFA) offers an alternative…

The next step in the evolution of investing…

With the potential to get better results.

Unlike passive investing, DFA does not rely on a commercial index.

It relies, instead, on the Nobel Prize-winning work of Eugene Fama and Kenneth French.

DFA focuses on capturing the key ‘dimensions’ that exist in the marketplace.

Dimensional Table

It’s this evidence-based approach that makes their funds so successful.

Eric Nelson Tweet-253375-edited

And those who use them, very happy.

Unlike passive investing, DFA requires investors to work with a select group of financial planners which it approves of and trains…

And have direct access to the funds…

To help them stick to their financial plan.

They believe that investors will have a better investment experience this way.

So that’s it.

There are basically 3 ways to invest.

Hopefully this post sheds some light on their differences.

And which is right for you.

If you’d like a second opinion on whether your investment management strategy’s working for you, give us a call.

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