For Dimensional Funds, there is a belief that having a diversified portfolio with tilts to value-style (as opposed to growth-style), small-caps and minimization of trading costs can help generate outperformance over time.
To consider if it is more efficient constructing your own factor-based portfolio, the starting point is to look at how much you would incur by investing in Dimensional Funds directly. Using Endowus to access the Dimensional World Equity Fund (which invests in both developed and emerging market stocks), you will incur approximately 0.65%-1.00% p.a. of all-in fees (0.4% p.a. TER for the fund and another 0.25-0.60% p.a. of Endowus management fees).
You should only consider a DIY approach, if you are able to able to create a similar portfolio at lower cost. As an individual investor, it is unlikely that you will be able to cost-efficiently build such a diversified portfolio via single stocks, as the Dimensional Global Core Equity Fund holds over 13,000 stocks. So, the next best option is to use a blend of core stock ETFs complemented by factor-based ETFs.
As a Singapore investor, one popular tax-efficient strategy to build up a core stock portfolio is to use the iShares Core MSCI World UCITs ETF (ticker: IWDA LN) and iShares Core MSCI EM IMI UCITs ETF (ticker EIMI LN). The former offers exposure to approximately 1,600 developed market stocks, while the latter provides exposure to approximately 2,600 emerging market stocks.
To achieve the tilts to value and small cap stocks, an ETF such as the iShares MSCI World Small Cap UCITS ETF (WSML LN) can be considered.
The downside of using these ETFs to DIY a factor-based portfolio is that you may not be optimizing the risk-return of the overall portfolio and there is no guidance on how much should you be allocated across the ETFs mentioned. In contrast, the portfolio manager for the Dimensional Fund is able to size and allocate to what he deems to be appropriate, since he/she can look through to the entire portfolio of stocks.
For the factor ETFs that you mentioned, they tend to be slightly more costly than core stock ETFs, i.e. the ETFs that you mentioned have TERs of between 0.3-0.5%. They also require you to already know what factor you are targeting specifically, perhaps to tactically outperform the broader market in the short-term. For example, MVOL and IWMO targets for low-vol and momentum factors respectively, which are not the same core principals as advocated by Dimensional.
For Dimensional Funds, there is a belief that having a diversified portfolio with tilts to value-style (as opposed to growth-style), small-caps and minimization of trading costs can help generate outperformance over time.
To consider if it is more efficient constructing your own factor-based portfolio, the starting point is to look at how much you would incur by investing in Dimensional Funds directly. Using Endowus to access the Dimensional World Equity Fund (which invests in both developed and emerging market stocks), you will incur approximately 0.65%-1.00% p.a. of all-in fees (0.4% p.a. TER for the fund and another 0.25-0.60% p.a. of Endowus management fees).
You should only consider a DIY approach, if you are able to able to create a similar portfolio at lower cost. As an individual investor, it is unlikely that you will be able to cost-efficiently build such a diversified portfolio via single stocks, as the Dimensional Global Core Equity Fund holds over 13,000 stocks. So, the next best option is to use a blend of core stock ETFs complemented by factor-based ETFs.
As a Singapore investor, one popular tax-efficient strategy to build up a core stock portfolio is to use the iShares Core MSCI World UCITs ETF (ticker: IWDA LN) and iShares Core MSCI EM IMI UCITs ETF (ticker EIMI LN). The former offers exposure to approximately 1,600 developed market stocks, while the latter provides exposure to approximately 2,600 emerging market stocks.
To achieve the tilts to value and small cap stocks, an ETF such as the iShares MSCI World Small Cap UCITS ETF (WSML LN) can be considered.
The downside of using these ETFs to DIY a factor-based portfolio is that you may not be optimizing the risk-return of the overall portfolio and there is no guidance on how much should you be allocated across the ETFs mentioned. In contrast, the portfolio manager for the Dimensional Fund is able to size and allocate to what he deems to be appropriate, since he/she can look through to the entire portfolio of stocks.
For the factor ETFs that you mentioned, they tend to be slightly more costly than core stock ETFs, i.e. the ETFs that you mentioned have TERs of between 0.3-0.5%. They also require you to already know what factor you are targeting specifically, perhaps to tactically outperform the broader market in the short-term. For example, MVOL and IWMO targets for low-vol and momentum factors respectively, which are not the same core principals as advocated by Dimensional.