Asset Allocation for Physicians: Building a Portfolio that Fits Your Risk Capacity

By Ron A. Rhoades, JD, CFP® and Chris Brown, Ph.D., CFP®

“How would you feel if your investment portfolio fell 30% in value?”

That is what a risk tolerance questionnaire asks. While a useful question, it is also the wrong one to build a plan on. The questionnaire measures your stomach. Your plan should be built around your balance sheet.

This article is about the difference, and about why it matters more for physicians than for almost anyone else. You earn late, you start with debt that would frighten most households, and your biggest financial asset for the first decade of your career is not in any account. It is you.

Two Different Questions: Willingness Versus Ability

Let’s start with the vocabulary, because two terms about risk get used interchangeably – but they are not the same thing.

Risk tolerance is your willingness to take risk – how much volatility you can live with before you do something you will regret. It is psychological. It is measured with questionnaires, the most widely used of which is a 13-item instrument that asks how you would react to losses, windfalls, and uncertainty (Grable & Lytton, 1999). A tolerance score is a snapshot of temperament. It can drift with the market – you feel bolder when the economy is strong, and conservative when the economy is weak.

Risk capacity is your ability to take risk – how much you (and your financial situation) can afford to lose without being knocked off course. It is not psychological. It is arithmetic. It comes out of your income, your savings rate, your time horizon, and your liabilities. You can compute it. Two physicians can share an identical tolerance score and have completely different capacities, because one is debt-free at 45 with a paid-off house and the other is 31, owes $250,000, and wants to buy into a practice in three years.

Here’s the thing… neither of these clearly reflect your own personal financial situation. Nor do they address the need to take on risk – perhaps the most important criteria of them all.

When Risk Capacity is Lower than the Questionnaire Thinks

Capacity is situational. Three situations are nearly universal in medicine, and each one quietly lowers the amount of equity risk a portfolio can carry – regardless of what the questionnaire says.

1. A large student-loan balance

The median medical-school graduate in the Class of 2025 left with about $200,000 in education debt: averages run near $210,000 at public schools and $245,000 at private schools, and roughly seven in ten graduates carry a balance (Association of American Medical Colleges, 2025).

Debt is negative fixed income. If you hold $250,000 in loans at 7% and $250,000 in stocks, you do not have a “balanced” position – you have a leveraged one. The loan is a short bond you issued, and it is working against you every day at a guaranteed rate. Borrowing at 7% to hold equities you hope will earn 7% is not a diversified plan; it is a spread bet with your own balance sheet as collateral.

That guaranteed 7% cuts both ways, and the good way is the useful one: paying the loan down is a risk-free return equal to its interest rate. Few asset classes offer a certain 7%. So, a large loan balance does two things to capacity: (1) It raises the floor on what your money must earn, and (2) it shrinks the cushion you have if stocks fall. Early in training, when the loan dwarfs the portfolio, the highest-risk-capacity move is often less equity risk and more debt paydown – not because stocks are bad, but because the balance sheet is already leveraged. (Note that if you have Public Student Loan Forgiveness availability, for your student loan, this can shift the recommendation on equities; as can the placement of equities in retirement accounts for which penalties are possible for early withdrawals. See also the discussion of human capital, below, as it affects your “balance sheet.”)

2. A short accumulation window before a practice purchase

Consider a physician three years from buying into a group or acquiring a practice, who needs $150,000 of down-payment capital ready when the deal closes. That money has a deadline. A deadline is the enemy of equity risk.

The danger is not average returns; it is the order of returns. A loss in the year before you need the cash cannot be waited out, because you are about to become a seller. This is sequence-of-returns risk, and the research that made it famous in retirement applies with equal force to any near-term goal: the damage from a decline is greatest precisely when you are about to draw the money down, and smallest when you have years to recover (Pfau & Kitces, 2014). A 30% drawdown is a buying opportunity for a 35-year-old’s retirement account and a catastrophe for the practice fund she needs next spring.

The practice purchase fund and the retirement fund are not the same money, even though they sit at the same custodian. The retirement money has a 30-year or greater time horizon and high capacity. The practice money has a 3-year horizon and almost none. Mixing them – funding both from one aggressive allocation – lets a bad year reach the goal that cannot survive a bad year.

3. A near-term down payment

The same logic governs the house. Money you will hand to a closing attorney in two or three years has a time horizon measured in months by the time the contract is signed. Its capacity for stock risk is close to zero, no matter how aggressive you are everywhere else. Short-horizon dollars belong in short-horizon assets – Treasury bills, a money-market fund, a short CD ladder – where the only job is to be there when you need them.

The unifying idea behind all three is that each investment pool should be goals-based. Each goal has its own time horizon, and therefore its own allocation. A single blended “risk number” for the whole household hides this. Sort the money by when you need it, and the right allocation for each bucket usually becomes obvious.

Human Capital: The Bond You Already Own

Now the other side of the balance sheet – the asset that explains why a young physician with a frightening loan balance can still, correctly, hold a stock-heavy retirement account.

Economists call the present value of your future earnings your human capital. For most people, it is the largest asset they will ever own, and for a physician early in practice it is enormous: decades of high, relatively stable income, discounted back to today. A 33-year-old attending with a long career ahead might have financial assets of $50,000 and human capital worth several million. The portfolio on the statement is the rounding error. The doctor is the asset.

The insight that reshaped lifecycle investing is this: for a salaried professional whose income does not rise and fall with the stock market, human capital behaves like a bond. It pays a steady “coupon” – your salary – year after year, largely independent of what equities do (Ibbotson, Milevsky, Chen, & Zhu, 2007). And if most of your total wealth is already in a giant bond-like asset, then to reach a sensible overall mix you should tilt the small financial slice you can actually invest toward stocks.

Picture total wealth as human capital plus financial capital. Early in your career, human capital is 90%-plus of the total, and it is bond-like. Holding 100% stocks in a small retirement account barely moves the total-wealth stock allocation off conservative. As you age, human capital is spent down and converted into financial capital and a paid-off home; the bond-like asset shrinks, so the financial portfolio should gradually add bonds to keep the total mix steady. That is the real reason age-based glide paths slope the way they do – not because old people are timid, but because the bond they were born with is running out.

There is a second, subtler reason the young can take more risk, and it is uniquely favorable to physicians: flexibility. Any worker who can lengthen a career or delay retirement in response to a bad market is, in effect, holding a financial option that lets them bear more portfolio risk up front (Bodie, Merton, & Samuelson, 1992). Few professions have more of that flexibility than medicine. The ability to work one more year, or a few more weekends, is real risk capacity that never shows up on a questionnaire.

Three cautions keep this from becoming a blank check:

Income is not equally bond-like across specialties. A salaried academic hospitalist has a very bond-like income. An equity-partner surgeon whose compensation tracks elective-procedure volume – and therefore the economy – has income with a meaningful “stock-like” component, and somewhat less capacity to pile equity on top of it.
Human capital is uninsured until you insure it. The whole argument rests on the coupon actually arriving. Disability is the event that destroys human capital overnight. Own-occupation disability insurance, and adequate term life insurance if others depend on you, are what convert fragile human capital into the dependable bond the model assumes (Ibbotson et al., 2007).
Don’t double down on your own sector. Your human capital is already a concentrated bet on healthcare. Loading the portfolio with hospital systems, device makers, and biotech stacks the same risk twice. Diversify away from the thing that already signs your paycheck.

What the Long History of Returns Actually Shows

Capacity tells you how much equity risk you can carry. The next question is what that risk has historically paid – and how wildly the answer swings with the holding period. The table below draws on the Matrix Book 2026, Dimensional’s annual compilation of index returns built on the size and value research of Fama and French (Dimensional Fund Advisors, 2026; Fama & French, 1993). All figures are total returns in U.S. dollars, annualized, for periods ending December 31, 2025.

Physician AA T1 - Average Annualized Returns 12-31-2025

“n/a” = the index’s history is shorter than the stated window. “Start” is the first full year of the series in the Matrix Book.

‡ The Dimensional Emerging Markets Value index is an all-cap value series, used here as the closest available proxy for EM large-value. “Dev. ex-US Large Blend” and “EM Large Blend” use MSCI large/mid-cap indices.

Important: Dimensional indices are not investable, charge no fees, and include periods of back-tested (hypothetical) data calculated retrospectively; they illustrate academic concepts rather than the returns of any fund (Dimensional Fund Advisors, 2026).

Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. The returns of indices presented herein reflect hypothetical performance and do not represent returns that any investor actually attained. Changes in the assumptions upon which such performance is based may have a material impact on the hypothetical returns presented. Hypothetical backtested returns have many inherent limitations. Unlike actual performance, they do not represent actual trading. Since trades have not actually been executed, results may have under- or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity, and may not reflect the impact that certain economic or market factors may have had on the decision-making process. Hypothetical backtested performance also is developed with the benefit of hindsight. Other periods selected may have different results, including losses. There can be no assurance that Dimensional Fund Advisors will achieve profits or avoid incurring substantial losses. Past performance is no guarantee of future results. Actual returns may be lower. The Dimensional and Fama/French indices represent academic concepts that may be used in portfolio construction and are not available for direct investment or for use as a benchmark. See index descriptions in Sources and Descriptions of Data for descriptions of the Dimensional and Fama/French index data.

For more information on the Sources and Descriptions of Data, please refer to the Appendix.

You cannot invest directly in an index. Average annualized returns of indexes do not include any reduction for the fees charged by mutual funds or ETFs, custodians, or investment advisory firms such as Scholar Financial, LLC. Such fees and costs would reduce the average annualized returns set forth above.

Four lessons sit inside that table.

The size and value premiums are real – over decades. Look down the 60-year column. U.S. Small Value compounded at 14.2% and U.S. Large Value at 12.3%, against 10.5% for the S&P 500. Over a working lifetime, a small and value tilt has historically added a meaningful premium – exactly the extra return Fama and French (1993) identified as compensation for bearing a particular kind of risk. Other risk premiums exist and should be incorporated into portfolios – such as the “high profitability” factor.
The premiums are not a wage; they are paid irregularly. Now look at the 5- and 10-year columns. U.S. Large Blend’s 10-year number (14.8%) tops U.S. Large Value (11.4%), and U.S. Small Value’s 5-year (13.0%) leads only recently. For a decade and a half, large U.S. growth led and the premiums hid. A tilt you cannot hold through years of underperformance is a tilt you should not adopt. Nevertheless, there exists a substantial probability (but not certainty) that a multi-factor investment strategy will outperform a total stock market index over any given 20-year period.
Diversification’s payoff is lumpy, and 2025 was a lump. International and emerging markets trailed the U.S. for much of the prior 25 years – MSCI World ex USA returned just 6.0% annualized over 25 years against the S&P’s 8.8%. Then 2025 arrived: a sharply weaker dollar and an international rally drove ex-US developed large value up 46.4% and ex-US small value up 47.4% in a single year. That is not a forecast you can bank; it is a reminder that the years diversification pays for itself are unpredictable and concentrated, which is precisely why you hold the exposure before you know which year it will be.
Shorter-term numbers are noise; respect the horizon. Emerging-markets large blend earned 4.7% annualized over five years and 34.4% in the last year alone. Same asset, same decade, wildly different stories depending on where you start the clock. The investor with the capacity to hold for 25 years saw 8.9% a year through it all. The investor who needed the money in year five did not get to wait for year six.

We highlight the 25-year returns, which began in 2001, at a time when valuations (particularly for “growth” stocks) were elevated. The purpose of our highlighting is to stress that over very long periods of time, such as 25 years or more, equities (stocks) on a highly diversified basis possess a very high probability (but not certainty) of outperforming fixed income investments.

What Returns Might Look Like from Here

History tells you what happened. It does not tell you what to expect, because starting valuations matter: an asset is priced differently in 2026 than it was in 1995, and price shapes future return.

For a forward view, this article uses Research Affiliates’ Asset Allocation Interactive (AAI), which publishes 10-year expected returns for more than 140 assets, built from each asset’s yield, expected growth, and the effect of valuations reverting toward normal (Research Affiliates, 2026). Unlike many of the expected returns published by major brokerage firms, the projections below are largely quantitatively driven.

AAI does not pretend to a single right answer. It publishes a range. The table below shows five points on the distribution of the 10-year annualized return for each asset class, as of May 31, 2026. The 50% percentile might be viewed as the most likely expected 10-year return, but as seen the potential range of returns is quite large.

Physician AA T2 - Expected 10Y AR as of 5-31-2026

All expected 10-year returns are nominal and are derived from Research Affiliates’ Asset Allocation Interactive modeling, using the valuation-dependent model, and using data as of May 31, 2026. This valuation forecast is based on mean reversion in the cyclically adjusted earnings yield (CAEY).

Indexes shown are capitalization-weighted, and are developed by Research Affiliates. Index returns do not include the impact of mutual fund / ETF fees and costs, custodial fees, and any fees charged by Scholar Financial, LLC. You cannot invest directly in an index.

Refer to the RA Capital Market Expectations Methodology for a full discussion of the modeling approach. Long-horizon expected returns should be utilized to generate strategic asset allocation portfolios, or longer-term assumptions in personal financial planning, and should not be utilized for purposes of market-timing.

How to read the percentiles: Each row is a forecast and an admission of uncertainty. Here is what the five numbers mean.

The 50th percentile (median) is the central estimate. It is the single best guess for the average annual return over the next ten years – the number to plan around. Half of modeled outcomes land above it, half below.
The 25th and 75th percentiles bracket the middle half of outcomes. There is roughly a 50% chance the realized 10-year return lands between them. This interquartile range is the “normal disappointment / normal delight” zone.
The 5th and 95th percentiles bracket a 90% range. Only about a 1-in-20 chance the realized 10-year return falls below the 5th, and 1-in-20 above the 95th. The 5th percentile is the closest thing to a planning “bad case.”
The width of the band is the asset’s risk. Bands narrow for high-quality bonds and widen for emerging-markets and small-value equities. A wide band is not a flaw in the forecast; it is the forecast telling you how much you are betting.

There are also two technical points keep the table honest. First, these are model estimates, not guarantees – useful for setting expectations and stress-testing a financial plan, but not useful for timing the market.

Second, the band is narrower than one year of volatility would suggest, because averaging a return over ten years cancels some of the noise: the spread of a 10-year annualized return is roughly the asset’s annual volatility divided by the square root of ten. Time does not reduce the risk of loss to zero, but it does compress the range of annualized outcomes – another way of saying that horizon and capacity travel together. What can reduce portfolio volatility is proper diversification across multiple, carefully selected asset classes, and a disciplined approach to portfolio rebalancing over time.

The forward view usually rhymes with the historical one in a specific way: after a long stretch in which U.S. large-cap stocks led, AAI’s valuation-aware median expected returns have tended to be higher for the assets that lagged – value, international, and emerging markets – than for the U.S. large-growth names that led. Whether that mean reversion arrives on schedule is exactly the uncertainty the percentile band is built to express.

Putting It Together

Using this data, we can turn asset allocation from a single risk score into a sequence of answerable questions – both for physicians and for many working professionals:

What are your goals and time horizons? Sort money accordingly. Retirement is decades away and high-capacity. The practice buy-in and the house are near and low-capacity. Give each goal its own allocation. Short-horizon dollars hold T-bills and short bonds; long-horizon dollars hold equities.
What is your human capital – the bond you already own? What insurance is appropriate? How does this impact your allocation? Your human capital is large, bond-like, and – once disability and life coverage are in place – dependable. That is what lets the long-horizon money lean equity-heavy early, even with loans outstanding (Ibbotson et al., 2007).
What loans do you have – and how should they impact your allocation? Are you eligible for PSLF? Treat the loan as negative fixed income. Paying down a 7% balance is a guaranteed 7% return and a reduction in leverage. Early on, it often outranks adding more stock.
Given the preceding, what is your risk capacity and risk tolerance? Set the equity mix with capacity first, tolerance second. Use the long history (Table 1) to size what diversified equity risk has paid, the forward ranges (Table 2) to set realistic expectations, and your capacity to decide how much of it your plan can hold through a bad decade. Then diversify broadly – across size, value, and the world – so you own the premium before you know which year it pays.
Re-check as the balance sheet changes. Loans amortize, human capital is spent down, goals arrive. The allocation that fit the 31-year-old resident is not the one that fits the 47-year-old partner. Capacity is a moving number; revisit it annually – and at major life changes.

Once your plan is built around time horizon, with each pool of money dedicated to a particular purpose, your risk tolerance tells you whether, based upon your current knowledge of investments, you are likely to stick with it. This is where the value of a fiduciary financial advisor comes in: they can help you stick with the plan, reviewing annually and coaching through times of uncertainty. They can evaluate the total fees and costs and ensure proper diversification.

Most of all, fiduciary financial advisors – vetted with guides like our Ten Tough Questions – can become trusted partners on your path to achieving the goals that your money is intended to do.

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About the Authors

Ron A. Rhoades, JD, CFP^®

Ron Rhoades is an Associate Professor of Finance at the Gordon Ford College of Business, Western Kentucky University. He also serves as a financial advisor at Scholar Financial, a practice within XY Investment Solutions LLC. With a background as both an attorney and a CERTIFIED FINANCIAL PLANNER™ professional, Ron is a nationally recognized authority on the fiduciary duties of financial advisors.

Chris Brown, Ph.D., CFP^®

Chris Brown is a faculty member in the Department of Finance at the Gordon Ford College of Business, Western Kentucky University, and a financial advisor at Scholar Financial, a practice within XY Investment Solutions, LLC. He holds the CERTIFIED FINANCIAL PLANNER™ designation and a Ph.D. in Finance. His research and teaching focus is on behavioral finance, retirement planning, and evidence-based investment strategies.

Disclosure

This article is for educational purposes only. Index returns are historical, do not reflect fees, and do not predict future results; forward-looking estimates are models that may prove wrong. Prices, values, and other data are obtained from sources deemed reliable at the time of use, but accuracy is not guaranteed.

The characters depicted are fictional and any relation to real persons is solely incidental. Scenarios and references to real people or experiences are used solely to illustrate educational concepts. These examples may not apply to your individual circumstances. It should not be construed as financial, legal, tax, or investment advice, nor as a recommendation to implement any specific strategy, product, or investment. As a fiduciary, we provide advice tailored to each client’s goals and financial situation. Consult with a qualified financial professional before making investment decisions.

Advisory services are offered through XYPN Sapphire and its various IAR brands under which it operates. XYPN Sapphires is an SEC registered investment adviser. For additional disclosure and privacy information, please visit XYPNSapphire.com/disclosures.

References

Association of American Medical Colleges. (2025). Physician education debt and the cost to attend medical school. https://www.aamc.org/data-reports/students-residents/report/physician-education-debt-and-cost-attend-medical-school

Bodie, Z., Merton, R. C., & Samuelson, W. F. (1992). Labor supply flexibility and portfolio choice in a life cycle model. Journal of Economic Dynamics and Control, 16(3–4), 427–449. https://doi.org/10.1016/0165-1889(92)90044-F

Dimensional Fund Advisors. (2026). Matrix book 2026: Historical returns data. Dimensional Fund Advisors LP. https://www.dimensional.com

Fama, E. F., & French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33(1), 3–56. https://doi.org/10.1016/0304-405X(93)90023-5

French, K. R. (2026). Data library [Data set]. Tuck School of Business at Dartmouth College. https://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html

Grable, J. E., & Lytton, R. H. (1999). Financial risk tolerance revisited: The development of a risk assessment instrument. Financial Services Review, 8(3), 163–181. https://doi.org/10.1016/S1057-0810(99)00041-4

Ibbotson, R. G., Milevsky, M. A., Chen, P., & Zhu, K. X. (2007). Lifetime financial advice: Human capital, asset allocation, and insurance. Research Foundation of CFA Institute. https://rpc.cfainstitute.org/research/foundation/2007/lifetime-financial-advice-human-capital-asset-allocation-and-insurance

Pfau, W. D., & Kitces, M. E. (2014). Reducing retirement risk with a rising equity glide path. Journal of Financial Planning, 27(1), 38–45. https://www.financialplanningassociation.org/article/journal/JAN14-reducing-retirement-risk-rising-equity-glide-path

Research Affiliates. (2026). Asset allocation interactive [Data tool]. Research Affiliates, LLC. https://interactive.researchaffiliates.com/asset-allocation

APPENDIX: SOURCES AND DESCRIPTIONS OF DATA (FOR HISTORICAL RETURNS)

The information presented in the Dimensional Matrix book has been developed internally and/or obtained from sources believed to be reliable; however, Dimensional Fund Advisors does not guarantee the accuracy, adequacy, or completeness of such information.

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. Equity investment risks include loss of principal and fluctuating value. Small cap securities are subject to greater volatility than those in other asset categories. International investing involves special risks, such as currency fluctuation and political instability. Investing in emerging markets may accentuate these risks. Sector-specific investments can also increase these risks. Fixed income risks include loss of principal and fluctuating value. Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks, including changes in credit quality, liquidity, prepayments, and other factors.

DIMENSIONAL US LARGE CAP VALUE INDEX January 1975–present Compiled by Dimensional from CRSP and Compustat data. The index composition consists of large cap companies in the eligible market whose relative price is in the bottom 30% of the large cap market after the exclusion of utilities, companies lacking financial data, and companies with negative relative price. The index emphasizes securities with higher profitability, lower relative price, and lower market capitalization. Profitability is defined as operating income before depreciation and amortization minus interest expense divided by book equity. The eligible market is composed of securities of US companies traded on the NYSE, NYSE MKT (formerly AMEX), and Nasdaq Global Market. Exclusions: non‑US companies, REITs, UITs, and investment companies. The index has been retrospectively calculated by Dimensional and did not exist prior to March 2007. Accordingly, the results shown during the periods prior to March 2007 do not represent actual returns of the index. Other periods selected may have different results, including losses. The calculation methodology for the index was amended in January 2014 to include profitability as a factor in selecting securities for inclusion in the index. The calculation methodology for the index was amended in November 2025 to limit single-security and sector concentration. Prior to January 1975 Compiled by Dimensional from CRSP and Compustat data. The index composition consists of large cap companies in the eligible market whose relative price is in the bottom 25% of the US Large Cap Index after the exclusion of utilities, companies lacking financial data, and companies with negative relative price. The eligible market is composed of securities of US companies traded on the NYSE, NYSE MKT (formerly AMEX), and Nasdaq Global Market. Exclusions: non‑US companies, REITs, UITs, and investment companies.

DIMENSIONAL US SMALL CAP GROWTH INDEX Compiled by Dimensional from CRSP and Compustat data. The index composition consists of companies with market capitalizations in the lowest 8% of the total market capitalization of the eligible market whose relative price is in the top 50% of all small cap companies after the exclusion of utilities, companies lacking financial data, and companies with negative relative price. The index excludes companies with the lowest profitability within the small cap growth universe. The index also excludes those companies with the highest asset growth within the small cap universe. Profitability is defined as operating income before depreciation and amortization minus interest expense divided by book equity. Asset growth is defined as change in total assets from the prior fiscal year to current fiscal year. The eligible market is composed of securities of US companies traded on the NYSE, NYSE MKT (formerly AMEX), and Nasdaq Global Market. Exclusions: non‑US companies, REITs, UITs, and investment companies. The index has been retrospectively calculated by Dimensional and did not exist prior to December 2012. Accordingly, the results shown during the periods prior to December 2012 do not represent actual returns of the index. Other periods selected may have different results, including losses. The calculation methodology for the index was amended in December 2019 to include asset growth as a factor in selecting securities for inclusion in the index. The calculation methodology for the index was amended in November 2025 to limit single-security and sector concentration.

DIMENSIONAL US SMALL CAP INDEX January 1975–present Compiled by Dimensional from CRSP and Compustat data. Market-capitalizationweighted index of securities of the smallest US companies whose market capitalization falls in the lowest 8% of the total market capitalization of the eligible market. The eligible market is composed of securities of US companies traded on the NYSE, NYSE MKT (formerly AMEX), and Nasdaq Global Market. Exclusions: non‑US companies, REITs, UITs, investment companies, and companies with the lowest profitability and highest relative price within the small cap universe. The index also excludes those companies with the highest asset growth within the small cap universe. Profitability is defined as operating income before depreciation and amortization minus interest expense divided by book equity. Asset growth is defined as change in total assets from the prior fiscal year to current fiscal year. The index has been retrospectively calculated by Dimensional and did not exist prior to March 2007. Accordingly, the results shown during the periods prior to March 2007 do not represent actual returns of the index. Other periods selected may have different results, including losses. The calculation methodology for the index was amended in January 2014 to include profitability as a factor in selecting securities for inclusion in the index. The calculation methodology for the index was amended in December 2019 to include asset growth as a factor in selecting securities for inclusion in the index. Prior to January 1975 Compiled by Dimensional from CRSP and Compustat data. Market-capitalizationweighted index of securities of the smallest US companies whose market capitalization falls in the lowest 8% of the total market capitalization of the eligible market. The eligible market is composed of securities of US companies traded on the NYSE, NYSE MKT (formerly AMEX), and Nasdaq Global Market. Exclusions: non‑US companies, REITs, UITs, and investment companies.

DIMENSIONAL US SMALL CAP VALUE INDEX January 1975–present Compiled by Dimensional from CRSP and Compustat data. The index composition is a subset of the US Small Cap Index. The subset is defined as companies whose relative price is in the bottom 35% of the US Small Cap Index after the exclusion of utilities, companies lacking financial data, and companies with negative relative price. The eligible market is composed of securities of US companies traded on the NYSE, NYSE MKT (formerly AMEX), and Nasdaq Global Market. Exclusions: non‑US companies, REITs, UITs, investment companies, and companies with the lowest profitability within the small cap value universe. The index also excludes those companies with the highest asset growth within the small cap universe. Profitability is defined as operating income before depreciation and amortization minus interest expense divided by book equity. Asset growth is defined as change in total assets from the prior fiscal year to current fiscal year. The index has been retrospectively calculated by Dimensional and did not exist prior to March 2007. Accordingly, the results shown during the periods prior to March 2007 do not represent actual returns of the index. Other periods selected may have different results, including losses. The calculation methodology for the index was amended in January 2014 to include profitability as a factor in selecting securities for inclusion in the index. The calculation methodology for the index was amended in December 2019 to include asset growth as a factor in selecting securities for inclusion in the index. The calculation methodology for the index was amended in November 2025 to limit singlesecurity and sector concentration. Prior to January 1975 Compiled by Dimensional from CRSP and Compustat data. The index composition is a subset of the US Small Cap Index. The subset is defined as companies whose relative price is in the bottom 25% of the US Small Cap Index after the exclusion of utilities, companies lacking financial data, and companies with negative relative price. The eligible market is composed of securities of US companies traded on the NYSE, NYSE MKT (formerly AMEX), and Nasdaq Global Mark

DIMENSIONAL INTERNATIONAL LARGE VALUE INDEX Compiled by Dimensional from Bloomberg securities data. Consists of large cap companies in eligible markets whose relative price is in the bottom 30% of their country’s large companies, after the exclusion of utilities and companies with either negative or missing relative price data. The index emphasizes companies with smaller capitalization, lower relative price, and higher profitability. The index also excludes those companies with the lowest profitability within their country’s large value universe. Profitability is defined as operating income before depreciation and amortization minus interest expense divided by book equity. The index monthly returns are computed as the simple average of the monthly returns of four subindices, each one reconstituted once a year at the end of each quarter of the year. Maximum index weight of any one company is capped at 5%. Countries currently included are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the UK. Exclusions: REITs and investment companies. The index has been retrospectively calculated by Dimensional and did not exist prior to April 2008. Accordingly, the results shown during the periods prior to April 2008 do not represent actual returns of the index. The calculation methodology for the index was amended in January 2014 to include profitability as a factor in selecting securities for inclusion in the index. The calculation methodology for the index was amended in November 2025 to limit sector concentration.

DIMENSIONAL INTERNATIONAL SMALL CAP INDEX January 1990–present Compiled by Dimensional from Bloomberg securities data. Market-capitalizationweighted index of small company securities in the eligible markets, excluding those with the lowest profitability and highest relative price within their country’s small cap universe. The index also excludes those companies with the highest asset growth within their country’s small cap universe. Profitability is defined as operating income before depreciation and amortization minus interest expense divided by book equity. Asset growth is defined as change in total assets from the prior fiscal year to current fiscal year. The index monthly returns are computed as the simple average of the monthly returns of four subindices, each one reconstituted once a year at the end of each quarter of the year. Maximum index weight of any one company is capped at 5%. Countries currently included are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the UK. Exclusions: REITs and investment companies. The index has been retrospectively calculated by Dimensional and did not exist prior to April 2008. Accordingly, the results shown during the periods prior to April 2008 do not represent actual returns of the index. The calculation methodology for the index was amended in January 2014 to include profitability as a factor in selecting securities for inclusion in the index. The calculation methodology for the index was amended in November 2019 to include asset growth as a factor in selecting securities for inclusion in the index. July 1981–December 1989 Created by Dimensional. Includes securities of MSCI EAFE countries in the bottom 10% of market capitalization, excluding the bottom 1%. All securities are market capitalization weighted. Each country is capped at 50%; rebalanced semiannually. Prior to July 1981 50% Hoare Govett Small Companies Index, 50% Nomura Small Companies Index.

DIMENSIONAL INTERNATIONAL SMALL CAP VALUE INDEX January 1990–present Compiled by Dimensional from Bloomberg securities data. Consists of small cap companies in eligible markets whose relative price is in the bottom 35% of their country’s respective constituents, after the exclusion of utilities and companies with either negative or missing relative price data. The index excludes securities with the lowest profitability within their country’s small cap universe. The index also excludes those companies with the highest asset growth within their country’s small cap universe. Profitability is defined as operating income before depreciation and amortization minus interest expense divided by book equity. Asset growth is defined as change in total assets from the prior fiscal year to current fiscal year. The index monthly returns are computed as the simple average of the monthly returns of four subindices, each one reconstituted once a year at the end of each quarter of the year. Maximum index weight of any one company is capped at 5%. Countries currently included are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the UK. Exclusions: REITs and investment companies. The index has been retrospectively calculated by Dimensional and did not exist prior to April 2008. Accordingly, the results shown during the periods prior to April 2008 do not represent actual returns of the index. The calculation methodology for the index was amended in January 2014 to include profitability as a factor in selecting securities for inclusion in the index. The calculation methodology for the index was amended in November 2019 to include asset growth as a factor in selecting securities for inclusion in the index. The calculation methodology for the index was amended in November 2025 to limit sector concentration. Prior to January 1990 Created by Dimensional. Includes securities of MSCI EAFE countries, in the top 30% of book to market by market capitalization conditional on the securities being in the bottom 10% of market capitalization, excluding the bottom 1%. All securities are market capitalization weighted. Each country is capped at 50%; rebalanced semiannually.

DIMENSIONAL EMERGING MARKETS VALUE INDEX Compiled by Dimensional from Bloomberg securities data. Consists of companies whose relative price is in the bottom 33% of their country’s respective constituents, after the exclusion of utilities and companies with either negative or missing relative price data. The index emphasizes companies with smaller capitalization, lower relative price, and higher profitability, excluding those with the lowest profitability within their country’s small cap universe. The index also excludes those companies with the highest asset growth within their country’s small cap universe. Profitability is defined as operating income before depreciation and amortization minus interest expense divided by book equity. Asset growth is defined as change in total assets from the prior fiscal year to current fiscal year. The index monthly returns are computed as the simple average of the monthly returns of four subindices, each one reconstituted once a year at the end of each quarter of the year. Maximum index weight of any one company is capped at 5%. Countries currently included are Brazil, Chile, China, Colombia, the Czech Republic, Greece, Hungary, India, Indonesia, Kuwait, Malaysia, Mexico, Peru, the Philippines, Poland, Qatar, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey, and the UAE. Exclusions: REITs and investment companies. The index has been retrospectively calculated by Dimensional and did not exist prior to April 2008. Accordingly, the results shown during the periods prior to April 2008 do not represent actual returns of the index. The calculation methodology for the index was amended in January 2014 to include profitability as a factor in selecting securities for inclusion in the index. The calculation methodology for the index was amended in November 2019 to include asset growth as a factor in selecting securities for inclusion in the index. The calculation methodology for the index was amended in November 2025 to limit sector concentration.

DIMENSIONAL EMERGING MARKETS SMALL INDEX January 1990–present Compiled by Dimensional from Bloomberg securities data. Market-capitalizationweighted index of small company securities in the eligible markets, excluding those with the lowest profitability and highest relative price within their country’s small cap universe. The index also excludes those companies with the highest asset growth within their country’s small cap universe. Profitability is defined as operating income before depreciation and amortization minus interest expense divided by book equity. Asset growth is defined as change in total assets from the prior fiscal year to current fiscal year. The index monthly returns are computed as the simple average of the monthly returns of four subindices, each one reconstituted once a year at the end of each quarter of the year. Maximum index weight of any one company is capped at 5%. Countries currently included are Brazil, Chile, China, Colombia, the Czech Republic, Greece, Hungary, India, Indonesia, Kuwait, Malaysia, Mexico, Peru, the Philippines, Poland, Qatar, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey, and the UAE. Exclusions: REITs and investment companies. The index has been retrospectively calculated by Dimensional and did not exist prior to April 2008. Accordingly, the results shown during the periods prior to April 2008 do not represent actual returns of the index. The calculation methodology for the index was amended in January 2014 to include profitability as a factor in selecting securities for inclusion in the index. The calculation methodology for the index was amended in November 2019 to include asset growth as a factor in selecting securities for inclusion in the index. Prior to January 1990 Fama/French Emerging Markets Small Cap Index.

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