Articles (1,174)

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Pension-Gate: Some Good News from CalPERS

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by Jay D. Franklin and Mark Hebner
Thursday, September 18, 2014

According to this press release, the $300 billion California Public Employees’ Retirement System (CalPERS) will eliminate its hedge fund program which currently consists of $4 billion spread over 24 hedge funds and six hedge fund-of-funds. For the fiscal year ending ...Read More

Archive
1173

The Nature of Capital and Income: A New Addition to IFA's Library

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by Jay D. Franklin and Mark Hebner — Wednesday, September 17, 2014

According to Joseph Schumpeter, the father of “creative destruction,” Professor Irving Fisher of Yale University was the greatest economist the United States ever produced.1 James Tobin, another ...Read More

1172

The Curse of the Five-Star Rating

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by Jay D. Franklin and Mark Hebner — Tuesday, September 16, 2014

A recent Wall Street Journal article (“Mutual Funds’ Five-Star Curse”, 9/8/2014) should give pause to investors who only pick managers with the coveted five-star rating from Morningstar. As ...Read More

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IFA's Ever-Expanding Hedge Fund Manager Hall of Shame

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by Jay D. Franklin and Mark Hebner — Monday, September 15, 2014

Last year, Index Fund Advisors inaugurated its Hedge Fund Manager Hall of Shame. Since then, quite a bit has happened with what Forbes called The Sleaziest Show on Earth. On September 8th, Mathew Martoma of ...Read More

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Do Target-Date Investors Behave Better in Times of Market Turmoil?

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by Jay D. Franklin and Mark Hebner — Friday, September 12, 2014

Due to the auto-enrollment requirements of the Pension Protection Act of 2006, target-date funds have gained significantly in popularity in recent years. To gain the full benefit offered by a target-date fund, ...Read More

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Q&A with IFA: ETFs vs. Tax-Managed Funds

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by Jay D. Franklin and Mark Hebner — Thursday, September 11, 2014

Question: I have heard that exchange-traded funds (ETFs) are more tax-efficient (have lower tax costs) than index mutual funds. For a taxable account, should I prefer to hold ETFs? Answer: There is a widely ...Read More

1168

A Look Back at Eugene Fama's 2013 Nobel Prize in Economics

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by Jay D. Franklin and Mark Hebner — Wednesday, September 10, 2014

As we approach the one year anniversary of Professor Eugene Fama winning the Nobel Prize in Economic Sciences, we thought it worthwhile to call attention to this article by his colleague at the University of ...Read More

1167

Two More Hedge Funds Bite the Dust

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by Jay D. Franklin and Mark Hebner — Tuesday, September 9, 2014

In a recent Wall Street Journal article1, we learned of the closing of Rinehart Capital Partners LLC which specialized in emerging markets stock picking. Interestingly, the manager (Andrew Cunagin) blamed ...Read More

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The Glide Path

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by Mark Hebner — Monday, September 8, 2014

IFA recommends a Glide Path strategy for all clients. This strategy reduces one index portfolio per year (1% less in asset allocation to stock indexes), based on the 100 Index Portfolio ...Read More

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A Look Back at a Classic (and Prescient) Investment Speech

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by Jay D. Franklin and Mark Hebner — Monday, September 8, 2014

“Trying Too Hard” is the title of the 1981 keynote speech delivered by Dean Williams of Batterymarch Financial Management to the Financial Analysts Federation Seminar. Unlike most other investment ...Read More

1164

Help Wanted: Stock Pickers Need Not Apply

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by Mary Brunson, Vice President — Friday, September 5, 2014

“The debate about whether you should hire an “active” fund manager who tries to beat the market by buying the best stocks and avoiding the worst — or a “passive” index fund ...Read More

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CAPE Fear: Valuation Ratios and Market Timing

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by Weston Wellington — Friday, September 5, 2014

As broad market indices such as the S&P 500 have set new record highs in recent weeks, many investors have become apprehensive. They fear another major decline is likely to occur and are eager to find ...Read More

1162

It's the Disclosure, Stupid!

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by Jay D. Franklin and Mark Hebner — Friday, September 5, 2014

In  perusing today’s press releases (9/2/2014) from the Securities and Exchange Commission (SEC), we received a reminder of the fact that just because a registered investment adviser has a fiduciary ...Read More

1161

A Textbook Case of Insider Trading

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by Jay D. Franklin and Mark Hebner — Thursday, September 4, 2014

When we hear about someone being charged with insider trading, the first thought that usually comes to mind is that of company executives or hedge fund sharpies that illegally profited from their access to ...Read More

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Q&A with IFA: Is There Any Type of Market Where Active Management Shines?

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by Jay D. Franklin and Mark Hebner — Wednesday, September 3, 2014

Question: Does Passive management make sense in all market conditions? Note: The question above was originally addressed in DFA’s Fama/French Forum. Professors Fama and French began their response with ...Read More

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Q&A with IFA: Do Fundamentals Tell Us When Stocks Are Overpriced?

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by Jay D. Franklin and Mark Hebner — Tuesday, September 2, 2014

Question: In their book Valuing Wall Street published in early 2000, Andrew Smithers and Stephen Wright claim that the Q ratio popularized by Nobel laureate James Tobin reliably ...Read More

1158

The S&P 500 Index Closes Above 2,000 and So What?

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by Jay D. Franklin and Mark Hebner — Friday, August 29, 2014

On August 26th, 2014, the S&P 500 Index closed above 2,000 for the first time by the skin of its teeth (2,000.02). To us at Index Fund Advisors, it is just a number and nothing to get excited about. We are ...Read More

1157

Q&A with IFA: Do Index Funds Contribute to Mispricing?

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by Jay D. Franklin and Mark Hebner — Friday, August 29, 2014

Question: Index funds buy stocks "blind" without regard to company fundamentals. Do their activities contribute to mispricing of securities? Note: The question above was originally addressed in ...Read More

1156

Q&A with IFA: Unwinding a Large Stock Position

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by Mark Hebner — Thursday, August 28, 2014

Question: I hold a large stock position in the company that I used to work for. Can IFA help me unwind that position so that I can invest the proceeds into a diversified portfolio? Answer: In the past, we have ...Read More

1155

International Bond Investing: To Hedge or Not to Hedge Currency Risk?

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by Jay D. Franklin and Mark Hebner — Wednesday, August 27, 2014

As with international equities, bonds issued in foreign currencies constitute more than half of the taxable bond market, and adding international bonds to a U.S.-only portfolio provides a diversification ...Read More

1154

Tough Times Continue for Stock Picking Fund Managers

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by Jay D. Franklin and Mark Hebner — Tuesday, August 26, 2014

In two recent Wall Street Journal articles1, Kirsten Grind detailed the continuing ascent of passive funds over active funds. Her first article began by noting Vanguard’s record in-flows which have ...Read More

1153

Vanguard Quantifies the Impact of Performance-Chasing

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by Jay D. Franklin and Mark Hebner — Monday, August 25, 2014

For many years now, IFA has called attention to the dismal performance of individual investors. The chart below shows the results of the DALBAR study which details how the average individual fund investor has ...Read More

1152

Q&A with IFA: Reducing Risk with Options

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by Jay D. Franklin and Mark Hebner — Friday, August 22, 2014

Question: Can put or call options be used to achieve a more predictable risk-return tradeoff? For example, should I purchase put options to minimize equity portfolio losses? Note: The question above was ...Read More

1151

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 ...Read More

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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

1149

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

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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

1147

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

1146

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

1145

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

1144

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

1143

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

1142

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

1141

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

1140

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

1139

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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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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