- Why Dimensional
Diversification is an essential tool available to investors. It enables them to capture broad market forces while reducing the uncompensated risk associated with individual securities. We have constructed strategies that seek to draw heavily upon this philosophy.
We believe successful investing means not only capturing reliable sources of expected return but managing diversifiable risks and other risks that do not increase expected returns. Avoidable risks include holding too few securities, betting on countries or industries, following market predictions, speculating in areas like interest rate movements, and relying solely on information from third-party analysts or rating services. To all these, diversification is an essential tool available to investors. While it does not eliminate the risk of market loss, diversification does help eliminate the random fortunes of individual securities and positions your portfolio to capture the returns of broad economic forces.
Dimensional's strategies diversify not only in the amount of securities they hold but in the range of capital markets they explore and develop. In this way, strategies are designed to focus on the factors that drive investment returns while reducing excess and undesirable risk.
Diversification does not eliminate the risk of market loss.