(From Perspectives, a blog provided by Dimensional Fund Advisors, LP. Learn more about Dimensional Fund Advisors here. The original post was published on December 30, 2021 and can be found here.)
Every year, Dimensional’s team of researchers and investment solutions leaders produce a range of resources and analysis to help financial professionals make smart, informed decisions around investing. This year was no different. Research conducted and perspectives shared by Dimensional in 2021 ran the gamut. From addressing the challenges of inflation and all-time market highs to ESG investing and GameStop, here is a look at some of the best original pieces published by Dimensional this year around some of the industry’s hottest topics.
The State of Inflation
Across the globe, everything screamed inflation this year, which makes it no surprise that one of the most-read pieces of 2021 on Dimensional’s Insights blog was named just that. “Everything Screams Inflation” takes a look at headlines over the past 50 years and shows the difficulty of timing markets around inflation expectations. Our Research team also published a scientific paper on the topic, “US Inflation and Global Asset Returns,” and an accompanying blog post, “Are Concerns About Inflation Inflated?”
Virtual Currency, Real Intrigue
Bitcoin and related cryptocurrencies (now numbering in the thousands) are the subject of much debate and fascination. In “Tales from the Crypto,” Dimensional helps financial professionals and investors better understand how to think about bitcoin given its dramatic price changes, which have many speculating about its role in a portfolio.
Making Sense of Market Moves
Another recurring theme: market records. In “All-Time-High Anxiety,” Dimensional reminds investors that what goes up does not always come crashing down. In fact, if stocks have a positive expected return, reaching record highs with some frequency is exactly the outcome one should expect.
Hot Stocks in the Headlines
If it wasn’t already, GameStop became a household name in early 2021 due to the stock’s significant price volatility over the course of just a few weeks. In “Think Investing Is a Game? Stop.” Dimensional Founder and Executive Chairman David Booth reminds readers of the difference between investing and gambling. And in “Flexibility in Practice: How We Handled GameStop,” Dimensional offers insight into the firm’s belief in a daily process to respond to new information about securities and their expected returns. GameStop serves as a prime example of why this is so important.
The Shift to Personalization
With the evolution in wealth management toward more personalized investment solutions and Dimensional’s 2021 launch of an expanded Separately Managed Accounts offering, our Research team takes a look at one of the potential benefits of SMAs in “Why It Pays to Diversify.” Investors who hold concentrated legacy portfolios may be hesitant to transition to a broadly diversified portfolio in an SMA because of potential taxes on capital gains. The firm’s research suggests that a broadly diversified strategy with a systematic focus on higher expected returns can improve investment outcomes over the long term, despite the taxes incurred in a portfolio transition.
For many individuals, aligning their values with their investment strategy is a priority, now more than ever. The challenge, however, arises in identifying the most effective way to make that happen. Dimensional dives into why sustainable investing decisions can be so difficult in “Beyond the Label, ESG Funds May Miss Their Mark,” explaining that the absence of a universally accepted definition of ESG investing has resulted in a broad array of approaches. This presents a potential dilemma for investors, as the components of ESG considered in an investment strategy, variables by which they are measured, and the method of incorporation can lead to a wide range of investment outcomes.
The information in this document is provided in good faith without any warranty and is intended for the recipient’s background information only. It does not constitute investment advice, recommendation, or an offer of any services or products for sale and is not intended to provide a sufficient basis on which to make an investment decision. It is the responsibility of any persons wishing to make a purchase to inform themselves of and observe all applicable laws and regulations. Unauthorized copying, reproducing, duplicating, or transmitting of this document are strictly prohibited. Dimensional accepts no responsibility for loss arising from the use of the information contained herein.
“Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., Dimensional Ireland Limited, DFA Australia Limited, Dimensional Fund Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd., Dimensional Japan Ltd., and Dimensional Hong Kong Limited. Dimensional Hong Kong Limited is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.
This information is intended for educational purposes and should not be considered a recommendation to buy or sell a particular security. Named securities may be held in accounts managed by Dimensional.
UNITED STATES: Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.
Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original value. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful.