Build DFA Target Date Fund Portfolios With ETFs

Learn to build Dimensional Fund Advisor Target Date Funds with ETFs. How do they compare against other portfolios?
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What are the DFA Target Date Funds?

The DFA Target Date funds are one-stop funds for your retirement savings. They range from 90% stocks to 20% stocks. They can be built with 6-7 ETFs.

For the past 10 years, the Dimensional 2040 target-date retirement income portfolio has returned 9.25 with a standard deviation of 14.21. The dividend yield is 2.03. The 30-year return is 8.84%. Year to date the Dimensional 2040 target-date retirement income portfolio Portfolio has returned 9.86%.

What is the historical return of DFA retirement income portfolios?

Below you can see the historical return of the DFA target-date funds.

NameAsset class countYear to dateReturn in 202010 year returnCAGR since 1989 (%)Risk levelExpense ratio
Dimensional 2030 Target Date Retirement Income Fund87.93%11.547.48.1820.05%
Dimensional 2040 Target Date Retirement Income Fund79.86%14.729.258.8430.05%
Dimensional 2050 Target Date Retirement Income Fund711.45%16.0510.239.2630.05%
Dimensional 2060 Target Date Retirement Income Fund711.45%16.0510.239.2630.05%
Dimensional Retirement Income Fund74.27%7.254.456.5810.05%

How does the DFA Target Date Fund portfolios compare to the best portfolios?

Below you can see the returns of the best portfolios that we have benchmarked.

NameSee PortfolioYear to dateReturn in 202010 year returnCAGR since 1989 (%)Draw Down
Premium Portfolio15.92%18.2913.8410.77-37.63%
Premium Portfolio8.30%18.118.6311.14-44.87%
Premium Portfolio13.48%19.712.8410.49-32.77%
Premium Portfolio20.78%3.198.5210.59-36.46%
Premium Portfolio20.17%3.668.6210.48-36.35%
Premium Portfolio15.18%21.0313.7810.83-37.00%
Premium Portfolio19.24%8.711.5610.65-35.26%
Premium Portfolio15.41%7.488.3910.64-37.91%
Premium Portfolio16.16%5.3610.8811.23-35.43%
Premium Portfolio20.81%3.4210.2110.47-40.85%

The DFA Retirement Income Funds are funds of funds, which means each retirement fund is a collection of other funds. In other words, each  DFA Retirement Income Fund is consists of several additional DFA funds.

This is the standard way of constructing target-date funds. It keeps down trading costs and lowers the complexity immensely. Both Vanguard and iShares employ the same methodology for creating their target-date funds.

Disclaimer: These are target-date funds. By design, their asset allocation will change over time. In general, target-date funds shift more of their assets towards bonds as you age to lower your risk. This means that the asset allocation below will have changed until we update it here at portfolioeinstein.com. This information on these funds was collected in 2018.

Note! The returns listed above for 2019 are higher (by approx. 2%) than those listed by DFA using their funds. This is because portfolioeinstein.com does not use DFA funds to replicate asset allocation, but what we consider the best funds. We favor low fees and a high amount of transparency in selecting the best funds.

How do you build the Dimensional Fund Advisor target-date funds with ETFs?

Note! Please check the fund prospectus for the exact asset allocation and funds to use. The target-date retirement funds from DFA use DFA funds and not ETFs!

Dimensional 2030 target-date retirement income portfolio                             

  • 17.50%  US Total Stock Market 
  • 17.50%  US Large Cap 
  • 10.50%  International Developed Blend 
  • 5.20%    Emerging Markets 
  • 5.20%    International All-World ex-US
  • 6.10%    Short-Term Investment-Grade 
  • 31.90%  TIPS 
  • 6.10%    2 Year Global Fixed Income 

Dimensional 2040 target-date retirement income portfolio                                           

  • 26.00%  US Total Stock Market 
  • 26.00%  US Large Cap 
  • 15.50%  International Developed Blend
  • 7.60%    Emerging Markets 
  • 7.70%    International All-World ex-US  
  • 8.60%    Short-Term Investment-Grade  
  • 8.60%    2 Year Global Fixed Income 

Dimensional 2050 target-date retirement income portfolio                             

  • 29.80%  US Total Stock Market   
  • 29.80%  US Large Cap      
  • 17.80%  International Developed Blend    
  • 8.70%    Emerging Markets        
  • 8.90%    International All-World ex-US  
  • 2.50%    Short-Term Investment-Grade  
  • 2.50%    2 Year Global Fixed Income         

Dimensional 2060 target-date retirement income portfolio       

  • 29.80%  US Total Stock Market  
  • 29.80%  US Large Cap     
  • 17.80%  International Developed Blend    
  • 8.70%    Emerging Markets        
  • 8.90%    International All-World ex-US    
  • 2.50%    Short-Term Investment-Grade   
  • 2.50%    2 Year Global Fixed Income        

Dimensional retirement income portfolio

This is a post-retirement portfolio and is meant to provide a source of stable income.

  • 6.40%    US Total Stock Market   
  • 6.40%    US Large Cap      
  • 3.80%    International Developed Blend    
  • 1.90%    Emerging Markets           
  • 1.90%    International All-World ex-US     
  • 47.60%  TIPS       
  • 32.00%  1 Year Fixed Income       

Who is Dimensional Fund Advisors?

Dimensional Fund Advisors (DFA) is a hugely successful mutual fund provider ($660 billion AUM). They provide access to their funds only through advisors. This means you cannot buy them through your brokerage. The Dimensional Fund Advisors methodology is weighted towards value and small-cap.

This is no surprise as two of the investment committee members of DFA are Eugene Fama and Kenneth French. They pioneered the model for describing asset class premia. Value and small-cap are among those asset classes that have the highest returns.

The impact on investing by Fama cannot be understated and is eloquently detailed in The Myth of the Rational Market by Justin Fox. DFA is the room filled with the people that invented modern finance.

DFA Vs. Vanguard

I regularly see a comparison between DFA and Vanguard. The issue stems from the fact that in some years, DFA funds have better returns, while in other years, Vanguard funds have higher returns.

See, for example:

DFA funds have higher expense ratios than Vanguard funds – a lot higher.

“The number of managers that can successfully pick stocks are fewer than you’d expect by chance. So, why even play that game? You don’t need to.” – David Booth, Founder and Executive Chairman, DFA

DFA says that their funds can better capture risk-premia (for example, small-cap and value premia). They have also stated that their trading methodology is different from vanilla index providers in that they will sometimes hold off big block trades until circumstances have become profitable.

See Master In Money Podcast With Ritzholz and his interview with David Booth. This is market timing, of course, on a grand scale, but then again, all investing is a form of market timing. It is only a matter of degree. See the video below on how DFA turns its market timing strategy into a trading advantage.

The funds from DFA are uncustomary lacking weighting towards value and small-cap. They also employ a healthy amount of TIPS. Don’t let that scare you. DFA has Eugene Fama and Kenneth French on their investing committee.

Resources for DFA retirement income funds portfolios

See a comparison of target-date funds in our article What Is The Best Target Date Fund? Learn way more about target-date funds in our article Target Date Fund Portfolios Learn about DFA here (super intro to what investing is right on the front page) They also have a youtube channel with info. It is updated regularly.

Related questions

Is Dimensional Fund Advisors passive?
Yes, DFA funds are passive but they follow DFA’s own indexes. The DFA indexes favor small-caps and value stocks. 

Are Dimensional Funds Worth It?
When you compare DFA funds to low-cost ETFs of Vanguard and iShares the funds have comparable returns.

What is the best Vanguard fund?
The best Vanguard fund is arguably the Vanguard Total Stock Market fund (VTI). 

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