When sharing Dimensional’s Quarterly Market Review last quarter, we commented on how it had been a long time since the summary page had depicted nothing but green arrows of positive returns. With a few minor variations in the score, we could almost just point to last quarter’s commentary and repeat ourselves this quarter: Enjoy the positive returns while they last, but don’t assume the same tune will keep playing forever.
That’s why we continue to sing the praises of global diversification. But what do we mean by that? It’s about more than just blindly holding a lot of stocks. Yes, we suggest effectively capturing the range of investments available in the big, wide world. But when an investor’s goals call for it, we’ll also incorporate an evidence-based tilt toward asset classes that are expected to outperform in the long run … while managing the risks involved!
Dimensional explored this subject a little deeper this quarter. In its closing slides, “Quit Monkeying Around,” they suggest the following (emphasis ours):
“First, by tilting a portfolio towards sources of higher expected returns, investors can potentially outperform the market without needing to outguess market prices. Second, implementation and patience are paramount. If one is going to pursue higher expected returns, it is important to do so in a cost-effective manner and to stay focused on the long term.”
Come what may in future quarters, that’s a song we’re happy to hum along with – over and over again.