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12-Steps:
Figure and Chart Index
The 12-Step Overview
About the Author
Preface
Short Book on Investing
IFA 12-Step Brochure [PDF]
Intro Print Version [PDF]
PowerPoint [PDF]
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Backtested Disclosures
Step 1
Active Investors
Pages
Page 1
Page 2
Page 3
Quotes
1.1 Introduction
1.2 Definitions
1.2.1 Active Investors
1.2.2 Index Funds Investors
1.2.3 Beating the Market
1.2.4 Risk Measurements
1.3 Problems
1.3.1 Active Investors are Everywhere
1.3.2 Active Investors are Gamblers
1.3.3 Active Investors Lose
1.3.4 The Poor Accounting of Active Investors
1.3.5 Stock Market Prices are Random
1.3.6 Stock Markets are Efficient
1.3.7 When Risk Capacity is not Matched with Risk Exposure
1.3.8 The High Cost of Turnover
1.3.9 The Emotional Stress of Active Investing
1.3.10 More than 1,500 Investors can be Wrong
1.4 Solutions
1.4 1.Active Investors Anonymous
1.4.2 The History of 12-Step Recovery Programs
1.4.3 The Big Book of Investing
1.4.4 Top Investors Agree
1.4.5 Index Funds Investors Win
1.5 Summary
1.6 Review Questions
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Step 2
Nobel Laureates
Pages
Page 1
Page 2
Page 3
Quotes
2.1 Introduction
2.2 Definitions
2.2.1 Nobel Prize in Economic Sciences
2.2.2 The University of Chicago, Center for Research
in Security Prices, and the Stock Market Database
2.3 Problems
2.3.1 Investors Rely on Lady Luck
2.3.2 Active Investors are Unaware of Academic Studies
2.4 Solutions
Nobel Laureates and Academics
Alfred Nobel
Blaise Pascal
Edmund Halley
Adam Smith
Louis Bachelier
Alfred Cowles
Harry Markowitz
James Tobin
Frank Modigliani
Merton Miller
William Sharpe
Paul Samuelson
Eugene Fama
Michael Jensen
Rex Sinquefield
Burton Malkiel
John Bogle
David Booth
Kenneth French
Who Should You Trust?
Market Forces
2.5 Summary
2.6 Review Questions
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Step 3
Stock Pickers
Pages
Page 1
Page 2
Page 3
Page 4
Quotes
3.1 Introduction
3.2 Definitions
3.2.1 Stock Pickers
3.2.2 Adjusted Performance
3.3 Problems
3.3.1 Why Stock Pickers Fail
3.3.2 The Stock Picker’s Graveyard
3.3.3 Incubator Funds
3.3.4 Studies and Observations that Show the Daunting Odds of Stock Picking
3.3.5 Stock Pickers and Coin Flippers
3.3.6 Stock Pickers are Focused on Short Term
3.3.7 Stock Pickers are Style Drifters
3.3.8 Stock Pickers are Looking for a Needle in a Haystack
3.3.9 Stock Pickers Play a Zero Sum Game
3.3.10 Stock Pickers in International Markets
3.3.11 Stock Pickers in Small-Cap Markets
3.3.12 Stock Pickers Pay More Taxes
3.3.13 Stock Picking Gurus and Their Real Records
3.3.14 Stock Pickers Don’t Want You to Know the Truth
3.4 Solutions
3.5 Summary
3.6 Review Questions
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Step 4
Time Pickers
Pages
Page 1
Page 2
Page 3
Quotes
4.1 Introduction
4.2 Definitions
4.2.1 Random Walk Theory
4.2.2 Efficient Market Hypothesis
4.3 Problems
4.3.1 Pickers are Fooled by Randomness
4.3.2 Academic Studies Prove that Time Picking doesn’t Work
4.3.3 Time Picking Gurus
4.3.4 Gains and Losses are Impossible to Identify in Advance
4.3.5 Time Pickers Pay More Taxes
4.4 Solutions
4.5 Summary
4.6 Review Questions
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Step 5
Manager Pickers
Pages
Page 1
Page 2
Page 3
Quotes
5.1 Introduction
5.2 Definitions
5.3 Problems
5.3.1 Past Performance is No Guarantee of Future Results
5.3.2 Persistence in Track Records
5.3.3 Sources of Information Used by Manager Pickers
Are Highly Rated Funds Good Thing?
The Forbes Mutual Fund Honor Roll
Mutual Fund Advertisements
5.3.4 Markets Make Managers
5.3.5 Irrelevant Benchmarks
5.4 Solutions
5.5 Summary
5.6 Review Questions
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Step 6
Style Drifters
Pages
Page 1
Page 2
Quotes
6.1 Introduction
6.2 Definitions
6.2.1 Investment Style
6.2.2 Style Drift
6.3 Problems
6.3.1 Style Drift Alters Risk Exposure
6.3.2 Style Drifters
6.3.3 Style Drift and the Fama/French Risk Factors
Style Picking
6.4 Solution
6.5 Summary
6.6 Review Questions
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Step 7
Silent Partners
Pages
Page 1
Page 2
Page 3
Quotes
7.1 Introduction
7.2 Definitions
7.3 Problems
7.3.1 Active Investors are Unaware of All the Costs
7.3.2 Taxes
7.3.3 Inflation
7.4 Solutions
7.4.1 Index Funds and Tax-Managed Index Funds
7.4.2 Reduce Taxes and Turnover Costs with Index Funds
7.5 Summary
7.6 Review Questions
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Step 8
Riskese
Pages
Page 1
Page 2
Page 3
Page 4
Page 5
Quotes
8.1 Introduction
8.2 Definitions
8.2.1 Standard Deviation
8.2.2 Probability Distributions and Histograms
8.2.3 Mean Reversion
8.2.4 Expected Return
8.2.5 Rolling Period Returns
8.2.6 Risk
8.2.7 The Dimensions of Stock Return
8.2.8 Implications of the Fama/French Three-Factor Model
8.2.9 Time Diversification of Risk
8.3 Problems
8.3.1 Active Investors don’t Understand Risk and Return
8.3.2 Investors Like Comfort and Dislike Uncertainty
8.3.3 Stock Pickers Dilute the Two Important Risk Factors
8.3.4 The Myth of the Ideal Investment
8.4 Solutions
8.5 Summary
8.6 Review Questions
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Step 9
History
Pages
Page 1
Page 2
Page 3
Quotes
9.1 Introduction
9.2 Definitions
9.2.1 Historical Databases and Studies
9.2.2 Time Series Construction
9.3 Problems
9.4 Solutions
9.4.1 Long-term History Characterizes Risk and Return
9.4.2 Cross Correlation among Indexes
A Comparative History of Several Indexes
using Rolling Periods
A Comparative History of Market Cap Deciles
The Returns Matrix
9.5 Summary
9.6 Review Questions
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Step 10
Risk Capacity
Pages
Page 1
Page 2
Page 3
Quotes
10.1 Introduction
10.2 Definitions
Dimension One: Time Horizon and Liquidity Needs
Dimension Two: Attitude Toward Risk
Dimension Three: Net Worth
Dimension Four: Income and Savings Rate
Dimension Five: Investment Knowledge
10.3 Problems
10.3.1 Investors do not Properly Assess Risk Capacity
10.3.2 Risk Capacity Changes over Time
10.4 Solutions
10.4.1 The Risk Capacity Survey
10.4.2 The Ten Dimensions of Risk
10.4.3 The Color of Risk Spectrum
10.4.4 Twenty Risk Capacities
10.4.5 Capacity Adjusted Risk
10.5 Summary
10.6 Review Questions
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Risk Capacity Survey
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Step 11
Risk Exposure
Pages
Page 1
Page 2
Page 3
Page 4
Page 5
Page 6
Quotes
11.1 Introduction
11.2 Definitions
11.2.1 Modern Portfolio Theory
11.2.2 Diversification
11.2.3 Global Diversification
11.2.4 Portfolio Rebalancing
11.2.5 Whole Portfolios
11.2.6 The Prudent Investor Act
Five Principles of Prudence
11.3 Problems
11.3.1 How Much Risk is There?
11.3.2 Where is the Data?
11.3.3 Investors Want to Avoid Risk
11.3.4 Risk is Good in Proper Doses
11.3.5 Portfolios Get Out of Balance
11.3.6 Selecting Index Funds
11.4 Solutions
11.4.1 Twenty Index Portfolios
11.4.2 Index Mutual Funds Earn more Return and Eliminate more Risk
11.4.3 The Most Efficient Funds on the Market
Small Cap Strategy
U.S. Small-Cap Strategy
U.S. Micro-Cap Strategy
Value Strategies
U.S. Small-Cap Value Strategy
U.S. Large-Cap Value Strategy
Real Estate Securities Strategy
U.S. Large Company Strategy
Developed International Markets
Emerging Markets
Fixed Income
11.4.4 Are Commodities Worth the Risk?
11.4.5 Matching People with Portfolios
Index Portfolios
Portfolio 100 - Bright Red
Portfolio 95 - Yellow
Portfolio 90 - Gold
Portfolio 85 - Orange
Portfolio 80 - Purple
Portfolio 75 - Dark Blue
Portfolio 70 - Dark Teal
Portfolio 65 - Dark Green
Portfolio 60 - Green
Portfolio 55 - Olive
Portfolio 50 - Sea Green
Portfolio 45 - Teal
Portfolio 40 - Aqua
Portfolio 35 - Sky Blue
Portfolio 30 - Pale Blue
Portfolio 25 - Ice Blue
Portfolio 20 - Light Turquoise
Portfolio 15 - Light Green
Portfolio 10 - Light Yellow
Portfolio 5 - Ivory
Data Sources
Asset Class Time Series
11.5 Summary
11.6 Review Questions
Print Version [PDF]
Returns Calculator
Portfolio Simulator
Comparison Charts
Backtested Performance Data
IFA Indexes
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Step 12
Invest and Relax
Pages
Page 1
Page 2
Quotes
12.1 Introduction
12.2 Definitions
12.2.1 Registered Investment Advisers
12.2.2 Dimensional Fund Advisors
12.2.3 Rebalancing Portfolios
12.2.4 Rebalancing Formula
12.2.5 Tax Loss Harvesting
12.2.5a Mutual Fund Distributions
12.2.6 Financial Advice
12.3 Problems
12.3.1 Active Investors Procrastinate
12.3.2 Active Investors "Go It Alone"
12.3.3 The Media Wants Investors to Worry
Invest in Index Mutual Funds
Asset Allocation
Minimization of Investment Costs
Minimization of Taxes
Reliable Investment Performance
A Simple and Understandable Investment Strategy
An Easier Way to Track Investment Performance
Increased Leverage and Compounding
of Investment Wealth
Invest like Institutional Investors
12.4 Solutions
12.5 Summary
12.6 Review Questions
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Step 8: Page:
Statistics Glossary
Visual
Statistics
8.1
