• Overview
• The 12-Step Overview [PDF]
• About the Author
• Preface
• Short Book on Investing
• PowerPoint [PDF]
• Gallery
• FAQ
• IFA Store
• Backtested Performance Data
• Intro Print Version [PDF]

Active Investors

• Page 1
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• 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

• 1.3.1 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 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

Print Version [PDF]

Nobel Laureates

• Page 1
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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

• 2.3.1 Investors Rely on Lady Luck
• 2.3.2 Active Investors are Unaware of Academic Studies

2.4 Solutions

• Nobel Laureates and Academics

2.5 Summary

2.6 Review Questions

Print Version [PDF]

Stock Pickers

• Page 1
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Quotes

3.1 Introduction

3.2 Definitions

• 3.2.1 Stock Pickers
• 3.2.2 Adjusted Performance

• 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

Print Version [PDF]

Time Pickers

• Page 1
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Quotes

4.1 Introduction

4.2 Definitions

• 4.2.1 Random Walk Theory
• 4.2.2 Efficient Market Hypothesis

• 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

Print Version [PDF]

Manager Pickers

• Page 1
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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

Print Version [PDF]

Style Drifters

• Page 1
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Quotes

6.1 Introduction

6.2 Definitions

• 6.2.1 Investment Style
• 6.2.2 Style Drift

• 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

Print Version [PDF]

Silent Partners

• Page 1
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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

• 7.4.1 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

Print Version [PDF]

Riskese

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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

• 8.3.1 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

Print Version [PDF]

History

• Page 1
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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

Print Version [PDF]

Risk Capacity

• Page 1
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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

• 10.3.1 Investors do not Properly Assess Risk Capacity
• 10.3.2 Risk Capacity Changes over Time

• 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 Ris

10.5 Summary

10.6 Review Questions

Print Version [PDF]

Risk Capacity Survey

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Quotes

11.1 Introductions

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

• 11.3.1 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

• 11.4.1 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 Matching People with Portfolios

11.5 Summary

11.6 Review Questions

Print Version [PDF]

• 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
• Backtested Performance Data
• Asset Class Time Series

Comparson Chart
DataSource
Portfolio Simulator
BackTestedPerformanceData

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Quotes

12.1 Introducation

12.2 Definitions

• 12.2.1 Registered Investement Advisers
• 12.2.2 Dimensional Fund Advisors
• 12.2.3 Rebalancing Portfolios
• 12.2.4 Rebalancing Formula

• 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

Print Version [PDF]

Appendix A - 20 Index Portfolios [PDF]

Appendix B - IFA Indexes [PDF]

Appendix C - Articles [PDF]

Appendix D - Disclaimers and Copyright [PDF]