Last Modified 1/23/2012

IFA Indexes Data Sources


leave message

The IFA Calculator:
See 83 years of monthly risk and return data for 100 Index Portfolios and 19 Global IFA Indexes HERE. Over 40,000 monthly returns to analyze.

Disclosure for Backtested Performance Information on the Simulated Strategies of IFA Indexes and IFA Index Portfolios:

  1. Index Funds Advisors, Inc. (IFA) is an SEC registered Investment Adviser. Information pertaining to IFA’s advisory operations, services, and fees is set forth in IFAs’ current Form ADV Part 2 (Brochure), a copy of which is available upon request and at www.adviserinfo.sec.gov.

    The performance information presented in certain charts or tables represent backtested performance based on combined simulated index data and live (or actual) mutual fund results from January 1, 1928 to the period ending date shown, using the strategy of buy and hold and on the first of each year annually rebalancing the globally diversified portfolios of index funds. Backtested performance is hypothetical (it does not reflect trading in actual accounts) and is provided for informational purposes only to indicate historical performance had the index portfolios been available over the relevant time period. IFA refers to this hypothetical data as a Simulated Passive Investor Experience (SPIE). IFA did not offer the index portfolios until November 1999. Prior to 1999, IFA did not manage client assets. The IFA indexing investment strategy is based on the principles of Modern Portfolio Theory and the Fama and French Three Factor Model for Equities and Two Factor Model for Fixed Income. Index portfolios are designed to provide substantial global diversification in order to reduce investment concentration and the resulting potential increased risk caused by the volatility of individual companies, indexes, or asset classes.
  2. A review of the IFA Index Data Sources (ifaindexes.com), IFA Indexes Time Series Construction (ifa.com/pdfs/tsc.pdf) and several of the Dimensional Indexes (ifa.com/pdf/DFAIndexes.pdf) is an integral part of this disclosure and should be read in conjunction with this explanation of backtested performance information presented. IFA defines index funds as mutual funds that follow a set of rules of ownership that are held constant regardless of market conditions. An important characteristic of an index fund is that its rules of ownership are not based on a forecast of short-term events. Therefore, an investment strategy that is limited to the buying and rebalancing of a portfolio of index funds is often referred to as passive investing, as opposed to active investing. Simulated index data is based on the performance of indexes and live mutual funds as described in the IFA Indexes Data Sources page. The index mutual funds used in IFA’s Index Portfolios are IFA’s best estimate of a mutual fund that will come closest to the index data provided in the simulated indexes. Simulated index data is used for the period prior to the inception of the relevant live mutual fund data and an equivalent mutual fund expense ratio is deducted from simulated index data. Live (or actual) mutual fund performance is used after the inception date of each mutual fund. The IFA Indexes Times Series Construction goes back to January 1928 and consistently reflects a tilt towards small cap and value equities over time, with an increasing diversification to international markets, emerging markets and real estate investment trusts as data became available. As of January 1928, there are 4 equity indexes and 2 bond indexes; in January 1970 there are a total of 8 indexes, and there are 15 indexes in March 1998 to present. See (http://www.ifa.com/pdf/The_Evolution_of_IFA_Portfolio.pdf) to see the analysis of the evolution of these portfolios. This PDF names the indexes used in the IFA Portfolios for each period, and page 4 of the PDF shows the Time Series Construction of the IFA indexes. If the original 4 equity indexes from 1928 (IFA US Large Company Index; IFA US Large Cap Value Index; IFA US Small Cap Index; IFA US Small Cap Value Index) are held constant until December 2010, the annualized rate of return of this simplified version of IFA Index Portfolio 90 is 10.44%, after the deduction of a 0.9% IFA advisory fee and a standard deviation of 22.79%. The evolving IFA Indexes over the same period have a 10.68% annualized return for IFA Index Portfolio 90 after the same IFA advisory fees and a standard deviation of 21.99%. The stitching together of index and live fund data and adding international markets, emerging markets and REITs only had a slight impact on risk and return over this 83 year period. Instead, it demonstrates the value of a small cap and value tilt in global equity markets, since over the same period a Simulated S&P 500 Index only had a return of 9.39% (with no fees deducted), at a standard deviation of 19.31%. Backtested performance is calculated by using a computer program and monthly returns data set that start with the first day of the given time period and evaluates the returns of simulated indexes and DFA index mutual funds. In 1999, tax-managed funds became available for many different DFA index funds.
  3. Backtested performance does not represent actual performance and should not be interpreted as an indication of such performance. Actual performance for client accounts may be materially lower than that of the index portfolios. Backtested performance results have certain inherent limitations. Such results do not represent the impact that material economic and market factors might have on an investment adviser’s decision-making process if the adviser were actually managing client money. Backtested performance also differs from actual performance because it is achieved through the retroactive application of model portfolios (in this case, IFA’s Index Portfolios) designed with the benefit of hindsight. As a result, the models theoretically may be changed from time to time and the effect on performance results could be either favorable or unfavorable.
  4. History of Changes to the IFA Indexes: 1991-2000: IFA Index Portfolios 10, 30, 50, 70 and 90 were originally suggested by Dimensional Fund Advisors (ifa.com/pdf/balancedstrategies.pdf), merely as an example of globally diversified investments using their custom index mutual funds, back in 1991 with moderate modifications in 1996 to reflect the availability of index funds that tracked the emerging markets asset class. Index Portfolios between each of the above listed portfolios were created by IFA in 2000 by interpolating between the above portfolios. Portfolios 5, 95 and 100 were created by Index Funds Advisors in 2000, as a lower and higher extension of the DFA 1991 risk and return line. As of March 1, 2010, 100 IFA Index Portfolios are available to IFA clients, with IFA Index Portfolios between the shown allocations being interpolations of the 20 allocations shown. In January 2008, IFA introduced three new indexes and twenty socially responsible portfolios constructed from these three indexes and five pre-existing IFA indexes. The new indexes introduced were: IFA US Social Core Equity, IFA Emerging Markets Social Core, and IFA International Real Estate. All three use live DFA fund data as long as it has been available. Prior to live fund data, they use index data supplied by DFA modified for fund management fees. In November 2011, IFA made a change to the index data used in its large growth and small growth indexes. Fama/French data was replaced with data supplied by Dimensional Fund Advisors via its Returns 2.2 program. For large growth, the difference in annualized return was about 1% (a decrease). For small growth, the difference was about 0.2%.Go to www.ifa.com/btp/historyofchange.html to see a summary of changes made to the IFA Indexes and Index Portfolios.
  5. Backtested performance results assume the reinvestment of dividends and capital gains and annual rebalancing at the beginning of each year. It is important to understand that the assumption of annual rebalancing has an impact on the monthly returns reported for the IFA Index Portfolio in both the Risk and Reward Table (www.ifabigtable.com) and the Index Calculator (www.ifacalc.com). For monthly rebalancing, the monthly return is calculated with the assumption that the portfolio is perfectly in balance at the beginning of each month. For annual rebalancing, the year-to-date return is calculated with the assumption that the portfolio is perfectly in balance at the beginning of the year. The latter assumption underlies the returns shown for the IFA Index Portfolios. In actual portfolios, however, rebalancing occurs at no set time, and such actions are dependent on both market conditions and individual client liquidity inflows and outflows, along with the cost impact of such transactions on the overall portfolio. Therefore actual monthly and year-to-date returns will differ from the IFA Returns Calculator. The reason for this difference is that with annual rebalancing, the monthly returns are calculated from the ratio of the year-to-date growth of $1.00 at the end of the month to the year-to-date growth of $1.00 at the beginning of the month. For monthly rebalancing, the monthly return is calculated with the assumption that the portfolio is perfectly in balance at the beginning of the month. The performance of the IFA Index Portfolios reflects and is net of the effect of IFA’s annual investment management fee of 0.9%, billed monthly, unless stated otherwise. Monthly fee deduction is a requirement of our software used for backtesting. Actual IFA advisory fees are deducted quarterly, in advance. This fee is the highest fee IFA charges. Depending on the amount of your assets under management, your investment management fee may be less. Backtested risk and return data is a combination of live (or actual) mutual fund results and simulated index data, and mutual fund fees and expenses have been deducted from both the live (or actual) results and the simulated index data. When IFA Indexes are shown in IFA Index Portfolios, all returns data reflects a deduction of 0.9% annual investment advisory fee, which is the maximum IFA fee. Unless indicated otherwise, data shown for each individual IFA Index is shown without a deduction of the IFA advisory fee. We choose this method because the creation, choice, monitoring and rebalancing of diversified index portfolios are the services of the independent investment advisor and at that point the fees are appropriate to deduct from the whole portfolio returns. Since we accept no fees from investment product firms, IFA compares index funds based on net asset value returns, which are net of the mutual fund company expense ratios only. Although index mutual funds minimize tax liabilities from short and long-term capital gains, any resulting tax liability is not deducted from performance results. Performance results also do not reflect transaction fees (as seen at www.ifafee.com) and other expenses, which reduce returns.
  6. For all data periods, annualized standard deviation is presented as an approximation by multiplying the monthly standard deviation number by the square root of 12. Please note that the number computed from annual data may differ materially from this estimate. We have chosen this methodology because Morningstar uses the same method. Go to www.ifabt.com for details. In those charts and tables where the standard deviation of daily returns is shown, it is estimated as the standard deviation of monthly returns divided by the square root of 22.
  7. The tax-managed index funds are not used in calculating the backtested performance of the index portfolios, unless specified in the table or chart.
  8. Performance results for clients that invested in accordance with the IFA Index Portfolios will vary from the backtested performance due to market conditions and other factors, including investments cash flows, mutual fund allocations, frequency and precision of rebalancing, tax-management strategies, cash balances, lower than 0.9% advisory fees, varying custodian fees, and/or the timing of fee deductions. As the result of these and potentially other variances, actual performance for client accounts may differ materially from (and may be lower than) that of the index portfolios. Clients should consult their account statements for information about how their actual performance compares to that of the index portfolios.
  9. As with any investment strategy, there is potential for profit as well as the possibility of loss. IFA does not guarantee any minimum level of investment performance or the success of any index portfolio or investment strategy. All investments involve risk and investment recommendations will not always be profitable.
  10. Past performance does not guarantee future results.
  11. IFA Index Portfolio Value Data is based on a starting value of one, as of January 1, 1928.
  12. DISCLAIMER: THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION PROVIDED HEREIN OR ON THE MATERIAL PROVIDED. This document does not constitute a complete description of our investment services and is for informational purposes only. It is in no way a solicitation or an offer to sell securities or investment advisory services. Any statements regarding market or other financial information is obtained from sources which we and our suppliers believe to be reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Neither our information providers nor we shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness of, or for any delay or interruption in the transmission thereof to the user. All investments involve risk, including foreign currency exchange rates, political risks, market risk, different methods of accounting and financial reporting, and foreign taxes. Your use of these materials, including www.ifa.com website is your acknowledgement that you have read and understood the full disclaimer as stated above. IFA Index Portfolios, times series, standard deviations, and returns calculations are determined in the Dimensional Returns 2.0 program. © Copyright 1999-2012, DFA, Inc.
  13. IFA licenses the use of data, in part, from Morningstar Direct, a third-party provider of stock market data. Where data is cited from Morningstar Direct, the following disclosures apply: ©2012 Morningstar, Inc. All rights reserved. The information provided by Morningstar Direct and contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Updated 10-31-2011. For additional updates see www.ifabt.com.
CONTINUE FOR IFA INDEXES DATA SOURCES

Other Information IFA Considers to be Helpful to Potential Clients

It is IFA's advice that the value of having a longer time series exceeds the concerns of index substitutions over the 1928 to present period. Due to the very high standard deviations of returns (21.99%) a 40 year or more sample size of data is recommended to obtain a T-statistic of 2, that allows a conclusion at a 95% or higher level of certainty. In other words, in IFA's opinion, smaller sample sizes introduce larger errors than the errors introduced by stitching together indexes and live data over time. This is the advice IFA provides to its clients.

Client portfolios are monitored and rebalanced, taking into consideration risk exposure consistency, transaction costs, and tax ramifications to maintain target asset allocations as shown in the IFA Portfolios.

IFA uses tax-managed funds in taxable accounts. The tax-managed funds are consistent with the indexing strategy, however, they should not be expected to track the performance of corresponding non-tax-managed funds in the same or similar indexes. As such, the performance of portfolios using tax-managed funds will vary from portfolios that do not utilize these funds.

Clients' accounts will be rebalanced depending on the fluctuation of the asset classes and the cash flow activity of the client. It is IFA's opinion that the assumption of first of the year annual rebalancing is a reasonable approximation to reality.

IFA is not paid any brokerage commissions, sales loads, 12b1 fees, or any form of compensation from any mutual fund company or broker dealer. The only source of compensation from client investments is obtained from asset based advisory fees paid by the client. More information about advisory fees, expenses, no-load mutual fund fees, prospectuses for no-load index mutual funds, brokerage and custodian fees can be found at www.ifa.com/Admin/fees.asp and on the gold navigation bar at the bottom of every page of www.ifa.com.

Not all IFA clients follow our recommendations, and depending on unique and changing client and market situations, we may customize the construction and implementation of the index portfolios for particular clients, including the use of tax-managed mutual funds, tax-loss-harvesting techniques and rebalancing frequency and precision. In taxable accounts, IFA uses tax-managed index funds to manage client assets.

Some clients substitute the mutual funds recommended by IFA with investment options available through their 401k or other accounts, thereby creating a custom asset allocation. The performance of custom asset allocations may differ materially from (and may be lower than) that of the index portfolios.

CONTINUE FOR IFA INDEXES DATA SOURCES




Call or Email
Index Funds Advisors, Inc. All rights reserved.
 Backtested Performance Info
 

This site is for the use of clients and potential clients of Index Funds Advisors, Inc. and the IFA Network Members. It is not to be used by any other investment advisor or investment professional as an information/marketing materials source, asset allocator, risk capacity or risk tolerance assessment, or for any other purpose. If your financial advisor is using this site without a license from Index Funds Advisors, Inc., they are violating our copyright and their ethics are highly in question. The right to download, store and/or output any material on this internet site, or the Index Funds: The 12-Step Program for Active Investors eBook, is granted for viewing use only and this grant only applies to clients and potential clients of Index Funds Advisors, Inc. and the IFA Network Members. Reproduction or editing by any means, mechanical or electronic, in whole or in part, without the express written permission of Index Funds Advisors, Inc. is strictly prohibited and subject to prosecution under U.S. and International copyright and trademark laws.

DISCLAIMER: THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION POSTED ON THIS OR ANY LINKED INTERNET SITE. At certain places on this Index Funds Advisors Internet site, live 'links' to other Internet addresses can be accessed. Such external Internet addresses contain information created, published, maintained, or otherwise posted by institutions or organizations independent of Index Funds Advisors. Index Funds Advisors does not endorse, approve, certify, or control these external Internet addresses and does not guarantee or assume responsibility for the accuracy, completeness, efficacy, timeliness, or correct sequencing of information located at such addresses. Use of any information obtained from such addresses is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy, and timeliness. Reference therein to any specific commercial product, process, or service by trade name, trademark, service mark, manufacturer, or otherwise does not constitute or imply endorsement, recommendation, or favoring by Index Funds Advisors.Your use of this site is acknowledgment that you have read and understood the full disclaimer. Past performance does not guarantee future results.

WARNING: Past performance does not guarantee future results. Investment returns and principal value will fluctuate, so that investors' shares, when sold, may be worth more or less than their original cost. Investing in any mutual fund, index or actively managed, does not guarantee that an investor will make money, avoid losing capital, or indicate that the investment is risk-free. Actively managed funds sometimes outperform index funds. You just don't know in advance which actively managed fund will outperform the appropriate index. Just because a mutual fund is an index mutual fund, it does not guarantee a performance superior to an actively managed mutual fund. There are no absolute guarantees in investing. When reviewing any backtested performance information on this internet site, please read the Disclosure for Backtested Performance Information (click here to read the Disclosure for Backtested Performance Information.) For a copy of the Index Funds Advisors, Inc. Privacy Policy, click here.

Index Funds Advisors, Inc.    No Active Funds
Index Funds Advisors, Inc. — 19200 Von Karman Ave., Suite 150  —  Irvine, CA 92612  
Call Toll Free: 888-643-3133 — Local Phone: 949-502-0050  —  Fax: 949-502-0048 — Email: info @ ifa . com
For several other offices and representative locations, see About Us.