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Tuesday, June 05, 2012

Boring is Better For DFA

News summary by MFWire's editors

Fixed income is supposed to be boring, according to Dimensional Fund Advisors [profile] founder David Booth, writes Jason Kephart for InvestmentNews.

His underlings at DFA also believe that boring fixed income is better.

"The principal role of fixed income is to reduce risk in the portfolio," said Weston Wellington, vice president and in-house research expert at DFA. "If you want to take on extra risk, just add more stocks."

With this view, DFA invests in short-term, high-quality bonds over high-yielding long-term or lower-quality bonds.

Its biggest fixed-income fund, the $7.5 billion One-Year Fixed-Income Fund, only invests in Treasuries and corporate bonds with a double-A rating or better.

"Fixed income is going to be a much more important asset class," said Tom Goodrom, a fixed-income specialist who joined the firm in January.

DFA has launched three funds on the fixed-income side recently.  

Edited by: HFD

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