Articles (1,152)

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Reaching for Yield—Non-Traditional Bond Funds

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by Jay D. Franklin and Mark Hebner
Monday, August 18, 2014

In late 2011, a few years after the beginning of the current era of very low interest rates, Morningstar launched the non-traditional-bond category. According to Morningstar’s Eric Jacobson, this category includes funds that pursue strategies that diverge in some way ...Read More

Archive
1151

Active vs. Passive—Have We Tipped Over the Tipping Point?

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by Jay D. Franklin and Mark Hebner — Friday, August 15, 2014

Regarding this question, a recent article on Morningstar.com caught our attention. John Rekenthaler, a Vice President of Research at Morningstar, questions whether active funds have a future in light of recent ...Read More

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Pension-Gate: Some Good News and Bad News

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by Jay D. Franklin and Mark Hebner — Thursday, August 14, 2014

The recent good news from the Wall Street Journal (summarized here) is that the California Public Employees’ Retirement System (CALPERS) is planning to drop the level of its hedge fund investments this ...Read More

1149

Fidelity Agrees to Settle 401(k) Lawsuits

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by Jay D. Franklin and Mark Hebner — Thursday, August 14, 2014

A little less than a year ago, we published this article about Fidelity facing a class action lawsuit by its employees alleging that the firm put them into costly proprietary funds in the firm’s ...Read More

1148

Pension-Gate and Muni Bonds—an Enforcement Action against Kansas by the SEC

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by Jay D. Franklin and Mark Hebner — Wednesday, August 13, 2014

While we at Index Fund Advisors have coined the term “pension-gate” to describe the overall mismanagement of public pension investments through active management, the real pension-gate is the ...Read More

1147

Invest Like a Hedge Fund? Thanks but No Thanks!

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by Jay D. Franklin and Mark Hebner — Wednesday, August 6, 2014

The Wall Street Journal recently featured an article, How Individual Investors Can Invest Like a Hedge Fund, that caught our attention. In light of recent poor performance which we have documented here and ...Read More

1146

Pension-Gate

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by Jay D. Franklin and Mark Hebner — Wednesday, August 6, 2014

Index Fund Advisors expended a large amount of time and effort in putting together the data that reveals the failure of active management for state pension systems. As of now, there is no central repository of ...Read More

1145

Quantifying the Value of Tax Loss Harvesting

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by Tom Allen and Mark Hebner — Tuesday, August 5, 2014

Tax loss harvesting is one service provided by most financial advisory firms and is one of the hardest to quantify in terms of value added. The professional opinion on this topic ranges from the “do it ...Read More

1144

Weston Wellington on Dimensional's Philosophy

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by Weston Wellington — Tuesday, August 5, 2014

Weston Wellington, Vice President of Dimensional Fund Advisors, explains how he came to embrace Dimensional's scientific approach to investing. Weston explains how the ideas discussed at Dimensional ...Read More

1143

The Active vs. Passive Debate Plays Out on MarketWatch

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by Jay D. Franklin and Mark Hebner — Tuesday, August 5, 2014

Those of us who are old enough to have watched 60 Minutes in the 1970s will undoubtedly remember the Point/Counterpoint segment which featured liberal and conservative spokesmen debating hot button issues of ...Read More

1142

FINRA Takes a Step in the Right Direction

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by Jay D. Franklin and Mark Hebner — Monday, August 4, 2014

A few months ago, we published an article about the problem of brokerage clients not being able to rely on information about their broker in FINRA’s BrokerCheck because of the ease with which brokers can ...Read More

1141

DFA Wins Another Survey of Financial Advisors

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by Jay D. Franklin and Mark Hebner — Friday, August 1, 2014

Market Strategies International just released its 2014 annual Advisor Brandscape report from its Cogent Reports Division™, and once again, Dimensional Fund Advisors (DFA) came out on top. The survey of ...Read More

1140

Some Discouraging Results from Gallup

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by Jay D. Franklin and Mark Hebner — Thursday, July 31, 2014

A few months ago, Gallup, Inc. conducted a poll that asked 1,026 Americans to choose the best option for their long-term investments. Here is how they answered: Real ...Read More

1139

Active vs. Passive — A Look at Pensions in the U.K.

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by Jay D. Franklin and Mark Hebner — Wednesday, July 30, 2014

In the past month, we have published two articles on the state of investment management in the U.K. In that regard, we found another video from our friends over at Sensible Investing that puts yet another nail ...Read More

1138

Some Interesting Data from the 2014 Investment Company Fact Book

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by Jay D. Franklin and Mark Hebner — Monday, July 28, 2014

The Investment Company Institute is the national association of U.S. investment companies, including mutual funds, closed-end funds, exchange-traded funds (ETFs) and unit investment trusts (UITs). ...Read More

1137

Does Past Performance Matter? The View from S&P Dow Jones Indices

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by Jay D. Franklin and Mark Hebner — Monday, July 28, 2014

S&P Dow Jones Indices recently released the latest version of its Persistence Scorecard. Any investor who chooses a fund manager based on performance relative to peers should thoroughly study this report. ...Read More

1136

IFA's Performance Monitoring Report vs. the fi360 Fiduciary Score

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by Jay D. Franklin and Mark Hebner — Wednesday, July 23, 2014

For the purpose of the quarterly monitoring of the funds that IFA advises for use by both our individual and institutional clients (including 401(k) plan sponsors), IFA has chosen to use its own proprietary ...Read More

1135

Risk Savvy—How to Make Good Decisions

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by Jay D. Franklin — Tuesday, July 22, 2014

A New Book by Gerd Gigerenzer Innumeracy is a word coined by cognitive scientist Douglas R. Hofstadter in the early 1980s to describe a lack of basic mathematical ability as it applies to everyday life. Later ...Read More

1134

An Interesting Accolade for Dimensional's Emerging Markets Small Cap Fund

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by Jay D. Franklin and Mark Hebner — Monday, July 21, 2014

A recent article in Bloomberg BusinessWeek about Dimensional Fund Advisors (DFA) Emerging Markets Small Cap Fund (DEMSX) caught our attention. The title, “Dimensional Winning in Emerging Markets: ...Read More

1133

Q&A with IFA: Market Timing with Moving Averages

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by Jay D. Franklin and Mark Hebner — Friday, July 18, 2014

Question: Some researchers argue that a market timing strategy based on buy/sell signals generated by a 50- or 200-day moving average offers a more appealing combination of risk and return than a buy-and-hold ...Read More

1132

Understanding Equity-Indexed Annuities

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by Jay D. Franklin and Mark Hebner — Thursday, July 17, 2014

Recently, a client asked us about potentially buying an equity-indexed annuity (EIA). Not to be confused with a variable annuity, an EIA is not held in a segregated account exclusively for the ...Read More

1131

IFA's Use of Tax-Managed Funds

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by Jay D. Franklin and Mark Hebner — Wednesday, July 16, 2014

For investors with taxable accounts, IFA has long advised the use of tax-managed funds for the purpose of maximizing after-tax returns. Please note that this is not the same goal as minimizing taxes. The five ...Read More

1130

The IRS Addresses Longevity Risk in Retirement Plan Accounts

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by Jay D. Franklin and Mark Hebner — Friday, July 11, 2014

In our summary of risks facing retirees, we identified longevity (the potential to outlive one’s assets) as one that has increased through time with medical advances leading to ever-longer ...Read More

1129

Active vs. Passive in the U.K.—A Follow-up

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by Jay D. Franklin and Mark Hebner — Thursday, July 10, 2014

A few weeks ago, we published this article about the dismal performance of active managers in the U.K. We saw that only 1% of them were found to reliably beat a risk-adjusted benchmark, but even for that 1%, ...Read More

1128

Transfer on Death and Retirement Account Beneficiaries

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by Jay D. Franklin and Mark Hebner — Wednesday, July 2, 2014

As you are probably aware, if you have an IRA, 401(k), or other type of retirement account, you must have a designated beneficiary(s). Normally, you will have a primary beneficiary as well as a contingent ...Read More

1127

With the Market at New Highs, How Should You Prepare for the Bear?

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by Jay D. Franklin and Mark Hebner — Wednesday, July 2, 2014

As of today (July 2nd, 2014), the Dow and the S&P 500 Index are flirting with new highs of 17,000 and 2,000, respectively. Both have come a long way from their low points of March 9th, 2009 (6,547 for the ...Read More

1126

The Second Quarter of 2014 in Review

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by Jay D. Franklin and Mark Hebner — Tuesday, July 1, 2014

In the second quarter of 2014, market risk was rewarded around the world, particularly for emerging markets and real estate. Portfolios tilted towards small cap companies were not rewarded to the same extent ...Read More

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Q&A with IFA: Prediction in Valuations

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by Jay D. Franklin and Mark Hebner — Monday, June 30, 2014

Question: Do valuation measures such as price-to-earnings or price-to-dividend ratios help predict future returns? Are they telling us anything now? Note: The question above was originally addressed in ...Read More

1124

Q&A with IFA: Front Running and Fair Pricing

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by Jay D. Franklin and Mark Hebner — Monday, June 23, 2014

Question: What is the relation, if any, between the practice of "front running" trades and the efficient market hypothesis? Note: The question above was taken from DFA’s Fama/French Forum. Here is their ...Read More

1123

Passive vs. Active—the View from Across the Pond

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by Jay D. Franklin and Mark Hebner — Monday, June 23, 2014

While perusing the Daily Telegraph, one of our Wealth Advisors came across this article that highlights the bloody awful results delivered by active managers in the U.K. Reporter Richard Evans cites Professor ...Read More

1122

Lord Abbett Funds: A Deeper Look at Their Performance

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by Jay D. Franklin and Mark Hebner — Friday, June 20, 2014

On a few occasions, we have been asked by prospective clients about Lord Abbett funds. Like American Funds, they have been around since the Great Depression and are fully dedicated to active management. As of ...Read More

1121

Q&A with IFA: Do Low-Volatility Strategies Produce High Returns

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by Jay D. Franklin and Mark Hebner — Friday, June 20, 2014

Question: Certain researchers have reported1 that low-volatility stocks in the U.S. outperform high-volatility stocks and attribute this apparent anomaly to investor behavioral biases as well as limits to ...Read More

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Is There a Manager Risk Premium?

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by Jay D. Franklin — Friday, June 20, 2014

A risk premium is the return in excess of a reference rate that an investment is expected to provide. At Index Funds Advisors, Inc., we often speak of three different equity-related risk premiums. First, the ...Read More

1119

Tough Times for the Bond King

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by Jay D. Franklin and Mark Hebner — Thursday, June 19, 2014

While patience is a virtue, it appears to be one that is not possessed by many investors in actively managed funds. It is this difficult lesson that PIMCO’s Bill Gross aka “The Bond King” has ...Read More

1118

FINRA Calls Out Merrill Lynch

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by Jay D. Franklin and Mark Hebner — Thursday, June 19, 2014

When reviewing retirement plans for our clients or for retirement plan sponsor clients, we often see the presence of mutual funds with front-end loads (Class A shares). However, we have always made the ...Read More

1117

The Never-Ending Pursuit of Manager Alpha – Updated

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by Jay D. Franklin and Mark Hebner — Wednesday, June 18, 2014

As we have pointed out on many occasions, both stock picking and hiring an active manager to pick stocks on your behalf are mug’s games. While some investors diligently study individual stocks and other ...Read More

1116

Passive vs. Active: Yet another Milestone Is Reached

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by Jay D. Franklin and Mark Hebner — Monday, June 16, 2014

According to this Bloomberg article, Vanguard just passed up Fidelity to become the number one provider of 401(k) assets, thus continuing the long-term trend of migration from passive to active that we have ...Read More

1115

The NACUBO Study

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by Mark Hebner — Thursday, June 12, 2014

You may think that college endowments, with all their access to academic knowledge and brainpower, would regularly hit home runs. You would be ...Read More

1114

A Graphical View of the Mutual Fund Landscape

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by Jay D. Franklin and Mark Hebner — Wednesday, June 11, 2014

Since IFA began operations in 1999, we have published articles detailing how incredibly stacked the odds are against successfully picking a manager who will beat his benchmark (i.e., deliver alpha). See here ...Read More

1113

Tough Times for Alternative Investment Strategies and Hedge Funds

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by Jay D. Franklin and Mark Hebner — Tuesday, June 10, 2014

At Index Fund Advisors, we are always distressed when we read articles such as this one that discusses a state pension plan increasing its exposure to alternative investments (i.e., investments beyond stocks, ...Read More

1112

Q&A with IFA: Dividends—Is Bigger Better?

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by Jay D. Franklin and Mark Hebner — Friday, June 6, 2014

Question: Does an equity strategy focusing on stocks with above-average dividend yield offer an appealing risk/reward tradeoff? Have dividend-paying stocks outperformed non-dividend payers in the U.S.? Note: ...Read More

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Q&A with IFA: Expected Returns and Socially Responsible Investing

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by Jay D. Franklin and Mark Hebner — Wednesday, June 4, 2014

Question: Are expected returns for "socially responsible" strategies lower compared to a conventional approach? Note: The question above was taken from DFA’s Fama/French Forum. Professors Fama and French ...Read More

1110

Q&A with IFA: Cap Weighting or GDP Weighting

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by Jay D. Franklin and Mark Hebner — Wednesday, June 4, 2014

Question: What is the merit, if any, in using a country weighting scheme based on Gross Domestic Product (GDP) rather than market capitalization? Note: The question above was taken from DFA’s Fama/French ...Read More

1109

Q&A with IFA: Seeking the Inefficient Asset Class

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by Jay D. Franklin and Mark Hebner — Tuesday, June 3, 2014

Question: We often hear the claim that some markets are less efficient than others—small company stocks, emerging markets, foreign exchange, and so on. Is there any evidence to support this assertion? ...Read More

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Q&A with IFA: Are Stock Returns Normally Distributed?

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by Jay D. Franklin and Mark Hebner — Monday, June 2, 2014

Question: What is the best way to describe the distribution of stock returns—a normal distribution, lognormal, or something else? What should investors do with this information? Note: The question above ...Read More

1107

Vanguard Successfully Debunks Some Myths and Misconceptions about Indexing

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by Jay D. Franklin and Mark Hebner — Tuesday, May 27, 2014

At Index Fund Advisors, we are extremely pleased with the continued success of passive over active. According to a recent Vanguard Research Note1, for the six years ending 12/31/2013, passively managed funds ...Read More

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Dimensional Bond Funds—Doing What They Are Supposed to Do

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by Jay D. Franklin and Mark Hebner — Monday, May 19, 2014

What is the proper role of fixed income in a diversified portfolio? As far as we at Index Fund Advisors are concerned, fixed income performs two vital functions. First, it dampens the volatility of the equity ...Read More

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Fairholme and Sequoia—No Great Performance Here

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by Jay D. Franklin and Mark Hebner — Thursday, May 15, 2014

Recently, we received a question from a client that we will paraphrase as follows: “While I know that the returns I have gotten from index funds have beaten the majority of active managers, would I not ...Read More

1104

Wealth Management with inStream

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by Jay D. Franklin and Mark Hebner — Thursday, May 15, 2014

“A goal without a plan is just a wish” ...Read More

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When Reality Confronts Investor Expectations

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by Jay D. Franklin and Mark Hebner — Wednesday, May 14, 2014

A recent survey of 1,050 American investors conducted by Natixis Global Asset Management found that they said they needed average annual returns of 9.8% above inflation to meet their financial needs such as ...Read More

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