Investors rejoice. DFA funds are now available to retail investors in the form of ETFs. Below we’ll explore the ETFs offered by Dimensional Fund Advisors.
Disclosure: Some of the links on this page are referral links. At no additional cost to you, if you choose to make a purchase or sign up for a service after clicking through those links, I may receive a small commission. This allows me to continue producing high-quality, ad-free content on this site and pays for the occasional cup of coffee. I have first-hand experience with every product or service I recommend, and I recommend them because I genuinely believe they are useful, not because of the commission I get if you decide to purchase through my links. Read more here.
Introduction – Dimensional Fund Advisors (DFA) ETFs
In a nutshell, DFA offers transparent, actively managed funds that provide broad, diversified market exposure with targeted, evidence-based factor exposure in order to both manage risk more effectively and boost expected returns, all at a relatively low cost. They have been converting their mutual funds to ETFs recently and simultaneously lowering fees.
Dimensional Fund Advisors led the way in implementing factor-based funds. Their Board of Directors includes famous names like Eugene Fama, Kenneth French, and Myron Scholes. Merton Miller was one of the original founding board members.
DFA has long been the gold standard for data-driven factor tilts (e.g. Value and Profitability), used by many asset management firms like Buckingham Strategic Wealth and PWL Capital. Previously, Dimensional’s funds were unavailable to DIY retail investors, which is why their launch of ETFs is so exciting.
Recall from my separate post on factor investing that the key is the implementation of factor targeting, which is altogether a different feat compared to the identification of a factor. The appeal of Dimensional is their proprietary, robust, impressive implementation.
DFA’s consistent, academia-derived strategies have been refined over the course of 40 years. They aim to focus on capturing the Market, Size, Value, and Profitability factor premia while maintaining portfolio diversification across cap sizes and geographies as well as minimizing turnover, trading costs, and tax impact.
So far DFA has released 3 new broad ETFs for retail investors, which we’ll discuss below, but they’ve also converted several of their tax-managed mutual funds to ETFs as well.
DFAU – Dimensional U.S. Core Equity Market ETF
As the name suggests, the Dimensional U.S. Core Equity Market ETF (DFAU) aims to provide broad U.S. market exposure, with an active, light tilt toward smaller stocks (Size) with strong profitability metrics (Profitability) and a lower relative price (Value). Think basically a U.S. stock market index fund that skews toward smaller stocks that we should expect to outperform the market over the long term based on the research.
In its extremely short lifespan thus far since January 2021, DFAU has outperformed the S&P 500 index, and with lower volatility. Hopefully the Value premium is making a resurgence.
DFAU has an expense ratio of 0.12%, which I think is well worth its appreciable factor loading.
DFAI – Dimensional International Core Equity Market ETF
DFAI takes the same approach described for DFAU above, but this time for Developed Markets outside the United States. If you desire factor exposure outside the U.S., DFAI is a reasonable solution. On the other hand, you may be content with factor exposure in U.S. stocks and a simpler, cheaper international equities fund like VXUS from Vanguard. This factor targeting in Developed Markets comes at a cost; DFAI has an expense ratio of 0.18%.
DFAE – Dimensional Emerging Core Equity Market ETF
Lastly, DFAE applies Dimensional’s approach to Emerging Markets. I’m a fan of overweighting Emerging Markets relative to Developed Markets in a US-heavy portfolio, as Developed Markets are highly correlated to the U.S.
This fund has the highest expense ratio of the three at 0.35%.
DFUS – Dimensional U.S. Equity ETF
Dimensional started its conversion of several of its tax-managed mutual funds to ETFs in June, 2021. DFUS used to be DTMEX, the Tax-Managed US Equity Portfolio. This ETF should provide similar exposure to DFAU above but at a slightly lower fee of 0.11%.
DFAS – Dimensional U.S. Small Cap ETF
The Dimensional U.S. Small Cap ETF (DFAS) is formerly the Tax-Managed US Small Cap Equity Portfolio (DFTSX). Its expense ratio has been lowered from 0.43% to 0.33%. While Dimensional is known for small cap value, keep in mind this ETF broadly covers the small cap space in the U.S. with a light Value tilt.
DFAT – Dimensional U.S. Targeted Value ETF
The Dimensional U.S. Targeted Value ETF (DFAT) is formerly the Tax-Managed US Targeted Value Portfolio (DTMVX). The fund has nearly $6 billion in assets. Its expense ratio dropped from 0.43% to 0.33%.
As the name suggests, this fund does indeed provide significant loading on the Value factor, but is more of a mid-cap value fund than true a small-cap value fund. Its loading on the Size factor is considerably lower than popular small-cap value funds like VIOV and AVUV. It also doesn’t seem to care as much about Profitability and Investment, whereas VIOV’s underlying index methodology and AVUV’s active management provide appreciable exposure to both of these as well.
DFAC – Dimensional U.S. Core Equity 2 ETF
The Dimensional U.S. Core Equity 2 ETF (DFAC) is formerly the TA US Core Equity 2 Portfolio (DFTCX), with its fee lowered from 0.23% from 0.19%.
DFIV – Dimensional International Value ETF
The Dimensional International Value ETF (DFIV) is formerly the Tax-Managed International Value Portfolio (DTMIX), with its expense ratio lowered from 0.50% to 0.35%.
DFAX – Dimensional World ex U.S. Core Equity 2 ETF
DFAX is formerly the TA World ex US Core Equity Portfolio (DFTWX), with its fee lowered from 0.30% to 0.25%.
Where To Buy These DFA ETFs
Thankfully, most of the above DFA ETFs should now be available at any major broker. My choice is M1 Finance. The broker has zero trade commissions and zero account fees, and offers fractional shares, dynamic rebalancing, intuitive pie visualization, and a sleek, user-friendly interface and mobile app. I wrote a comprehensive review of M1 Finance here.
Disclaimer: While I love diving into investing-related data and playing around with backtests, I am in no way a certified expert. I have no formal financial education. I am not a financial advisor, portfolio manager, or accountant. This is not financial advice, investing advice, or tax advice. The information on this website is for informational and recreational purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. Do your own due diligence. Past performance does not guarantee future returns. Read my lengthier disclaimer here.
Don't want to do all this investing stuff yourself or feel overwhelmed? Check out my flat-fee-only fiduciary friends over at Advisor.com.