In my last blog, I focused on David G. Booth, one of the founding partners of Dimensional Funds. Today I will focus on his partner, Mr. Rex Andrew Sinquefield and his early years.

When I started writing these blogs, it seemed to me from my preliminary research that so much of whom DFA is and what makes them so special stems from the unique backgrounds of each of the founding partners. I have been especially intrigued with Mr. Sinquefield.

To me, Mr. Sinquefield embodies the true American dream. He has a real life rags to riches story that continues to unfold. I am amazed at how he overcame the obstacles of his childhood and used these experiences for the good. His could not have been the easiest of childhoods. Rex was born in St. Louis, Missouri in 1945. At the age of 5, his father died. His mother fell into difficult financial times and as result, from the age of 8-14, Rex and his brother Jerry went to live at St. Vincent Home for Children in St. Louis, Missouri. Rex is quoted as saying that the orphanage was “a good family, a big extended family. It was a regimented orphanage. There, I developed a sense of responsibility and a work ethic.”   To this day, Mr. Sinquefield remains an active supporter of St. Vincent where he serves on the Board of Trustees. It is quoted that the most admirable character about him is that “he never forgot his roots and has compassion for the orphans that St. Vincent serves today.” It goes further to declare:  “How many wealthy people in this modern world will go back to serve honorably the orphanage where they grew? He has the worldly possessions but is full of compassion. He shares his wealth with the indigent and the needy.”

After leaving St. Vincent, Rex was reunited with his mother and older sisters. He remained in St. Louis where he graduated from Bishop DuBourg High School in 1962. In 1964, he enrolled in seminary, but left feeling that he “wasn’t settled yet” and ended up attending St. Louis University where he graduated in 1967 with a B.S. in Business.  Rex was also drafted and sent to Fort Riley, Kansas for two years. Rex ultimately “landed in a place where his life’s profession was found” by attending the University of Chicago.   He is quoted as saying, “I went to the University of Chicago for an MBA. There, I got my first heavy duty exposure to the notions of efficient markets, the notion capital markets really do work well. They’re informationally efficient. That influenced quickly what I wanted to do.” During his time at the University of Chicago, Rex studied and researched historical stock market returns and the emergent new academic field of index funds. “These theories have influenced the way investing has operated ever since”, Rex noted. He goes further to say: “I was in a fortunate position to start and operate the world’s first S&P index fund. That was an idea I had in business school. I wasn’t the only one who had that idea. For those of us who were hard core students of financial economics at the time-this is 1970-72-the idea of building a market portfolio was probably a very good strategy, but was nonexistent in the real world. It was quite a challenge to persuade those on the outside that this model made a lot of sense. It was a battle of ideas.”

Wow…am I really understanding this correctly? Rex Sinquefield was the first one to start and operate the world’s first S&P index fund?!!  Well, since the purpose of this series of blogs is to understand why Dimensional Funds is different, I would list this one as a big difference.  Their insight, creativity, and financial trend setting are some of the many things that separate them from other funds.

In my next blog, I will continue with Rex’s story and focus on the creation of Dimensional Fund Advisors and his time there.

Sources:

http://supportrexsinquefield.blogspot.com/

http://fujah.com/current-issue/141-rex-sinquefield-self-made-millionairethe-man-his-passions.html

http://www.dfaus.com/library/bios/rex_sinquefield/

- Sharon Kinter, Associate Financial Planner and Budget Coach, 09-July-2011

Today is Part II of a series of articles entitled: Dimensional Funds Advisors:   Who Are They and What Makes Them So Valuable to Investors?

The core of the Dimensional Funds history stems back to their founders: David G. Booth and Rex Sinquefield. Prior to my research, I had never heard of either of these two men, but it would appear that they are both considered “Rock Stars” of the Investment world. Let’s do a bit of history on both of them.

David G. Booth is the CEO and Co-Chair Executive Office of Dimensional Funds Advisors. Mr. Booth was raised in Lawrence, Kansas. In 1968 and 1969 he received a B.A. and an M.A. in Economics from the University of Kansas. In 1971, he graduated with an M.B.A. from the University of Chicago where he met his future DFA partner, Rex Sinquefield. A key influence on Mr. Booth was his time spent as a research assistant to Eugene Fama, the economist who is credited as the “father of efficient markets hypothesis” that now guides modern investing.

In 2008, Mr. Booth is credited with making one of the largest donations to an American university in history. He donated $300 million to his alma mater, the University of Chicago’s Graduate School of Business. Mr. Booth felt indebted to the school, having been quoted as saying:

“The University of Chicago basically plucked me out of Kansas and put me on this trajectory…Sometimes I wonder, why me? But it happened.”

The University of Chicago’s Graduate School of Business has since been renamed the school to the University of Chicago Booth School of Business in Booth’s honor.

Mr. Booth has historically been a private person, choosing to remain out of the limelight. In light of this very large donation, Mr. Booth recognizes that he is now stepping out into the public eye. The Wall Street Journal quotes:

“The gift represents a coming-out for Mr. Booth, who is largely unknown outside the rarefied world of academic research and in finance. In the 27 years since founding Dimensional, Mr. Booth has played a behind-the-scenes role, while his now-retired partner, Rex Sinquefield, was the public face of the company.
Mr. Booth said he is nervous about stepping out into the public with the grant and namesake school. “We’ve worked really hard at keeping a low profile,” he said in an interview. Now, “my life as I know it will be changing,” he said.

In my next blog, I will discuss Mr. Booth’s founding partner, Rex Sinquefield.

- Sharon Kinter, Associate Financial Planner and Budget Coach, 26-May-2011

I have a confession to make. I have been an employee of Summit Financial Planning for going on one year. During my time here, I have known that one of the differentiators between Jennifer Luzzatto and other Financial Planners is the fact that she is a Fee-Only planner and is able to offer her clients Dimensional Funds for their investment portfolio. So, here is where the confession comes in. I do not fully understand who DFA is or what makes them so good. I really do not like admitting that,  as an employee of Summit, I do not have a clear picture on the answers to those questions. I just know that I trust Jennifer and she has described them as the “Rock Stars” of the investment world.

I do a lot of things in this life based on my intuition and gut.  Not only did my gut tell me that I wanted to work for Jennifer and that I loved everything she stood for, but my husband and I feel so confident in her abilities that we moved all of our investments under her careful management. Then, we moved my mother’s portfolio to her and now my sister and brother-in-law have invested with Jennifer.   It is a huge leap of faith that our entire family fortune is with Jennifer (sorry Jennifer…are you feeling any pressure?!!)

So, where am I headed with this? I have decided that I cannot be alone in my lack of understanding about DFA and why they are so valuable. After all, I am both an employee AND a client and I do not fully get it. Therefore, Jennifer and I agreed that I am going to write a series of articles about DFA for the Summit Blog. While I am hesitant to call it “DFA for Dummies”, that is somewhat going to be my approach. My goal is to take a journey through the information about DFA and simplify it for the average non-investment type of person. I hope to not only educate myself, but to educate others to be able to answer the question of: “Who is DFA and What makes them so valuable?” Stay tuned!

- Sharon Kinter, Associate Financial Planner and Budget Coach, 2-May-2011

Have you ever wondered how to get rid of unwanted junk mail that litters your mail box day after day? Everyday a new catalogue will come, tempting me to buy the latest season’s fashions. Or, a furniture store displays the latest decorating looks and I go into my house and wish I could update my sofa, paint a room, or otherwise do some sort of redecorating in my house. There are some days that the mail never even makes it into my house because it is all junk mail and it goes straight into the garage recycling bin.
If it isn’t catalogues, it is unwanted/unsolicited credit card offers, trying to convince me to switch over to a newer and better credit card. Did you know that credit card solicitations are a large source for identity theft?

There are many benefits to reducing or eliminating this type of junk mail, but how? In reading the latest issue of Consumer Reports Magazine, I found out. Go to https://www.dmachoice.org and you can sign up to eliminate credit card offers and be taken off lists for catalogues and magazine subscriptions. By doing this, you can reduce your chances of identity theft, help the environment by not getting so much paper, and help your bank account by reducing your temptations to buy unplanned for and potential unneeded merchandise.

- Sharon Kinter, Para-Financial Planner and Budget Coach, 20-Feb-2011

The deadline for filing tax returns this year has been extended from April 15, 2011 to April 18, 2011.  According to IRS sources, audits of individual tax returns are up 100% since 2001. Here is a short list of some best practices to keep in mind as you file your return for this year:

1. Report All Income-Do not exclude a single penny
2. Verify Donations with back-up documentation

3. Accurately deduct auto mileage and be sure to include documentation.

4. Carefully report capital transactions

5. Avoid minor mistakes like transposing numbers on a social security number, math errors and having an incorrect filing status.
Lastly, it appears that when an individual takes advantage of filing electronically, there are 2 benefits. First, there is a lower error rate and second, audits on electronically filed returns are lower.

- Jennifer Luzzatto,  CFA, CFP, NAPFA Registered Financial Advisor, 2-Feb-2011

- Sharon Kinter, Para-Financial Planner and Budget Coach, 2-Feb-2011

My four year old daughter loves soap. That has always been a favorite toy for her. I have to ration it when she takes a bath. What does this have to do with anything? Well, on Christmas Day, I was awestruck by a simple act of generosity. “Santa” left three bars of her favorite soap that my mother had bought at a farmer’s market that we visit a few times each summer. My daughter loves this soap. It comes in these beautiful clear colors and smells so good. She took the three bars and looked at my Mom and gave her one. Then she looked at another four year old girl that was visiting that morning and gave her one. We asked her why she was giving away her beloved soap. “Because I have more than I need,” she replied. We were dumbstruck. Was this coming out of a four year olds mouth?

During the weeks leading up to Christmas I had been rigorously cleaning out closets. We would talk about giving away things that can be used by others when we no longer use them. We also washed the clothes of some of the homeless men that were staying at our church the week before Christmas. My daughter and I talked about helping others, even when it might not be especially convenient. To me, the soap episode was an amazing example of what we do and say affects our children, how easily they understand and get on board with loving others. Now, before you get the wrong impression. My daughter is a very normal four year old girl. She cried at the store today because I would not buy her new shoes a mere three days after Christmas. But it was wonderful to see a glimpse of her looking outside herself and thinking about others.

- Jennifer Luzzatto,  CFA, CFP, NAPFA Registered Financial Advisor, 30-Dec-2010

Nathan Dungan is the Founder and President of an organization called Share, Save, Spend. His company’s mission is the spread the message of financial sanity through a program bearing the company’s name of “Share, Save, Spend.”

Nathan believes that what we do with our money can change the world. His passion is educating consumers about life in today’s economy and trends that are taking place in our world.

Check out this message that I recently received on what the future hold on how we pay for purchases. It seems that debit cards and credit cards may someday become a thing of the past. But…be careful as this new convenience may prove costly.

- Sharon Kinter, Para-Financial Planner and Budget Coach, 8-Dec-2010

http://www.sharesavespend.com/Articles/50/APreviewofComingAttractions.aspx

“My insurance company doesn’t offer a flexible spending account, but I just read that anyone can get a Health Savings Account.  Is this true?  If so, is there a criteria for deciding whether it would benefit me?” – R.H in Richmond

Dear R. H.,

Generally, if you are covered under a high-deductible health plan (HDHP) you are eligible to establish a health savings account (HSA).  A qualifying HDHP has an annual deductible of at least $1,200 for individual coverage or $2,400 for family coverage and limits annual out-of-pocket expenses to $5,950 for individual coverage or $11,900 for family coverage.

You will not be eligible to open an HSA, even if you are covered under an HDHP, if any of the following apply:

• You are already covered under a non-HDHP, including a comprehensive major medical plan, a plan sponsored by your employer or your spouse’s employer, or a prescription drug plan or rider with a low deductible or no deductible.
• You can be claimed as a dependent on another person’s income tax return.
• You are entitled to Medicare coverage, and have enrolled in Medicare.

In order to open an HAS on your own, you can establish one through any qualified trustee or custodian, including a bank, an insurance company, or a third-party administrator.

One of the advantages of HSAs is that unlike flexible spending accounts, HSAs do not have a “use it or lose it” provision.  Funds remaining in your account at the end of the year are not forfeited and can continue to accumulate tax free year after year until withdrawn.  So, it will benefit anyone with qualified medical expenses, which pretty much covers all of us.

- Jennifer Luzzatto,  CFA, CFP, NAPFA Registered Financial Advisor, 28-Nov-2010

Some informtion in this post was sourced from Forefield

I recently read this article on the world’s healthiest foods. I don’t know about you, but I get completely confused about what I should be doing from a healthy eating perspective. It seems like every time you turn around, they (who is “they” anyway?) are telling us what is best for us to be eating. Even recently, according to my elementary school aged kids, the government has changed its definition of what we should be eating each day and how many servings we should be having. Okay, I will admit, I really don’t know when the government changed its food pyramid. Is it even still a pyramid? They could have changed it years ago and I am just realizing it. All I know is that every time I turn around, I am getting some other piece of information about what I should be doing. Layer in that with trying to keep your kids healthy and a husband who would be just as happy if they eliminated fruits and vegetables completely from the food pyramid, and you have a very bewildered person on your hands…that being me.

Okay, so what does this have to do with budgeting and financial planning??

Here is my answer: Time and Money

Number one, it takes time (and an advanced education!) to figure all of this out. And number two is the money part. Does buying healthy mean spending more money?

Whatever happened to those days of just going to the grocery store and buying your food and coming home? The days I speak of were before the likes of Trader Joes, Tom Leonard’s, Whole Foods and Costco. Now, deciding what section of the fruit and vegetables section of the grocery to shop in seems like a decision between life and death! You head over to buy those grapes that are on sale, only to stop short to purchase them because they are not “organic” which are double the price of the “regular” grapes. Next thing you know, you are in a predicament of whether those “regular” on sale grapes you would like to pack in your kid’s lunch are the equivalent to sentencing your child to some sort of terrible life threatening disease that they later find the root cause was those “regular” grapes you bought on sale 20 years before!!!

Ugh…the pressure! Ok, now what to do?   Not sure. Read on. I don’t have an answer. But I take reassurance that no matter what I do, this article states that “the world’s healthiest foods are affordable.”

- Sharon Kinter, Para-Financial Planner,10-Nov-2010

http://www.stumbleupon.com/su/1Db6Su/www.whfoods.com/foodstoc.php

Attached is a YouTube video by Dave Ramsey that I found very intriguing. He suggests that people need to get off this Merry go round of revolving car leases/car payments. Most people know that investing money in a depreciating asset is not a great idea. But many people are stuck in this vicious circle and have come to accept that a car payment is a way of life, much like taxes.  One could argue that there maybe are some flaws in his logic, such as the assumption of a 12% annualized return on an average mutual fund, or the ability to get such high returns while still periodically removing 12 – 18,000$ of the principal. However, the basic premise is very sound. Stop paying finance charges on a depreciating assets and pay cash for them. Plan and save for these large purchases by being disciplined and let your money work for you.

- SFP Webmaster, 26-Oct-2010