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How We Improve on Index Funds

Using DFA (Dimensional Fund Advisors) funds allows us specific advantages over other index funds. Early on, investors used indexes to track managers’ performance on a risk-adjusted basis. Years later, many indexes have been licensed to fund providers allowing investors to gain diversified exposure to an asset class. However, if the index fund is not a precise representation of the asset class, it may not be worth the cost required to track them. Unfortunately, the huge inflows into index funds have changed the dynamics of indexes. Remember that indexes are now investment vehicles, not simply a long list of stocks to reference relative performance. There are three major issues that the growth of index funds has created.