By: Jack Strada – KOM Financial Planning

KOMFPWebThe story of the first Thanksgiving is one of giving thanks for a bountiful harvest. The early settlers from England were grateful because they had saved enough food to ensure they would survive the winter. Nowadays, we don’t have to worry about where our food will come from over the winter. Nonetheless, we should be setting enough savings aside to ensure we will live comfortably in the ‘winter’ years of our lives.

Assuming you are saving diligently, the next question is – where should I put my money? I recommend that everyone should have some of their investments in the stock market as this is almost guaranteed to grow faster than inflation over the long-term. If you are putting money into the stock market, the next question becomes – which market? There are a multitude of choices, and in this blog I will touch on some ‘facts and fictions’ of value investing.

Value investing has been around a long time. Warren Buffett, inspired by the late Benjamin Graham, has been a lifetime proponent of value investing. From a recent paper from AQR Capital: Fact, Fiction, and Value Investing, I provide the following summary:

Fiction: Value investing is only effective in actively managed portfolios – the Buffett approach.
Fact: The existence of the value premium is a well established fact as evidenced in 87 years of US equity data, and data from some 40 other countries. Applying a value strategy to a diversified portfolio may be done with readily available mutual funds.

Fiction: Value investing works best as a standalone strategy.
Fact: Value investing works best when combined with other strategies, in particular, momentum investing.

Fiction: Value investing works equally well for all classes of stock.
Fact: Value strategies produce weak effects among large-cap stocks.

Dimensional Fund Advisors offer investors funds to capture the premiums from value investing, and they have been doing this for over thirty years. They also employ momentum strategies when buying and selling from their portfolio, thus taking advantage of the value/momentum mix. If you would like to learn more about investing with DFA, please contact me at