Articles (1,204)

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Towers Watson Revisits the Gotrocks Family

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by Jay D. Franklin and Mark Hebner
Friday, October 31, 2014

In his 2005 shareholder letter, Warren Buffett envisioned a hypothetical family (the Gotrocks) who just happened to own all the companies in America. While each family member could have been content to simply collect their dividends, some of them hired “helpers” ...Read More

Archive
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Investors Continuing to Be Their Own Worst Enemy—Evidence from the Fed

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by Jay D. Franklin and Mark Hebner — Thursday, October 30, 2014

With the S&P 500 Index up about 170% from its low point in March of 2009, investors should have cause for rejoicing. Unfortunately, it now appears that many investors were there for the risk but did not ...Read More

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Enhancing Returns in Passively Managed Bond Funds

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by Jay D. Franklin and Mark Hebner — Wednesday, October 29, 2014

While the title of this article may seem like an oxymoron, it definitely does not refer to the activity of seeking out mispriced bonds, for the bond market is efficient, with prices incorporating investor ...Read More

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Can Managers Pick Managers?

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by Jay D. Franklin and Mark Hebner — Tuesday, October 28, 2014

Your mother may have taught you that cheaters never prosper, but what about copycats? When it comes to mutual fund managers, the answer is sometimes, but not for long, at least according to three researchers ...Read More

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More Troubled Waters for Hedge Funds

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by Jay D. Franklin and Mark Hebner — Monday, October 27, 2014

A few months ago, we published this article about the difficulties faced by hedge funds and alternative strategy mutual funds in delivering acceptable returns to their shareholders. Since that time, the ...Read More

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Memo to Pimco: Don't Mess with St. Jack!

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by Jay D. Franklin and Mark Hebner — Friday, October 24, 2014

Those of us who follow the financial media have been treated to a verbal slugfest featuring the Father of Retail Index Funds, Jack Bogle, going against Pimco Managing Director James Moore. It began with Mr. ...Read More

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IRS Increases Allowed Retirement Plan Contributions for 2015

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by Internal Revenue Service — Thursday, October 23, 2014

The Internal Revenue Service today announced cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2015. Many of the pension plan limitations ...Read More

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Pension-Gate: The Repercussions of CalPERS' Hedge Fund Decision

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by Jay D. Franklin and Mark Hebner — Thursday, October 23, 2014

About a month ago, we published this article about the $300 billion California Public Employees’ Retirement System (CalPERS) deciding to terminate its $4 billion hedge fund program. Today, we were ...Read More

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When a White Paper Should Be Ignored

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by Jay D. Franklin and Mark Hebner — Wednesday, October 22, 2014

In the investment industry, a claim that is backed up by a white paper takes on an aura of invincibility or unassailability. We at Index Fund Advisors find this to be an unfortunate state of affairs, for as we ...Read More

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How to Improve Your Economic Forecast

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by Jay D. Franklin and Mark Hebner — Tuesday, October 21, 2014

Knowing that we at Index Fund Advisors do not engage in economic forecasting, you can safely assume that the above title is meant to be facetious, just like this Wall Street Journal opinion piece titled ...Read More

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The Google Effect?

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by Jim Parker — Monday, October 20, 2014

What can’t Google do? Free email, customized searches, maps, apps, browsers, video—the list goes on. Now researchers claim to have found a link between Google searches and future stock market ...Read More

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The Five Qualifications of a Risk Premium

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by Jay D. Franklin and Mark Hebner — Monday, October 20, 2014

How can we determine whether or not we have identified an exploitable risk premium—a source of higher expected returns that we can implement in our portfolios? To understand the concept of a risk ...Read More

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Year-End Fund Distributions & Portfolio Management

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by Tom Allen and Mark Hebner — Friday, October 17, 2014

At Index Fund Advisors, it is standard operating procedure for us to tailor how we manage client portfolios at year-end in anticipation of dividend and capital gains distributions from the mutual funds that we ...Read More

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When Stock Speculation Was Rampant in San Francisco

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by Jay D. Franklin and Mark Hebner — Tuesday, October 14, 2014

About a decade after the California Gold Rush came a silver rush resulting from the discovery of the Comstock Lode in Nevada. What distinguished the latter from the former was that the bulk of the people who ...Read More

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Supreme Court: Time Doesn't Heal All Wounds

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by Jay D. Franklin and Mark Hebner — Monday, October 13, 2014

We are quite pleased to learn about two recent court rulings on a topic that is very important to us, fiduciary protection in retirement plans. Both rulings rejected arguments that the plan sponsor defendants ...Read More

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The Little Known Retirement Savings Vehicle – Cash Balance Plans, Part 1

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by Tom Allen and Mark Hebner — Friday, October 10, 2014

Saving for retirement always seems like a monotonous topic of discussion – the party killer if you will. Terms like 401(k), Safe Harbor, salary deferrals, Roth contributions, do not draw the same amount ...Read More

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A Summary of the 2005 SEC Study of Pension Consultants

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by Jay D. Franklin and Mark Hebner — Friday, October 10, 2014

In 2005, the Securities and Exchange Commissions (SEC) published a study of investment consultants who are hired by pension plans to pick managers for them. The SEC conducted focused examinations of ...Read More

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Do Investment Consultants Add Value?

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by Jay D. Franklin and Mark Hebner — Thursday, October 9, 2014

Large institutional investors such as foundations, endowments, and pension plans spend billions of dollars on investment consultants on whom they rely to pick active managers. Recently, three researchers (two ...Read More

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Yet Another Problem with Active Investing: Manager Turnover

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by Mary Brunson and Mark Hebner — Thursday, October 9, 2014

The surprise exit of Bill Gross from PIMCO likely has scores of investment committee members scratching their heads, wondering how to handle their fixed income mandates. Gross had fostered a stunning ...Read More

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A Second Look at the Indian Mutual Fund Landscape

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by Jay D. Franklin and Mark Hebner — Wednesday, October 8, 2014

About eight months ago, one of our contacts in India (Jatin Visaria) sent us an analysis of fifty of the largest mutual funds domiciled in India that had at least fourteen years of returns data. We published ...Read More

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SCM

Wealth Management Parody

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by SCM — Monday, October 6, 2014

We found a great little Wealth Management Parody video from SCM we wanted to ...Read More

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Is Diversification Still Your Buddy?

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by Jay D. Franklin and Mark Hebner — Monday, October 6, 2014

The title above refers to a famous quote from Nobel laureate Merton Miller, who was a teacher to the Father of Modern Finance, Eugene Fama. It also refers to the fact that for the first three quarters of 2013, ...Read More

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The Third Quarter of 2014 in Review

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by Jay D. Franklin and Mark Hebner — Thursday, October 2, 2014

In the third quarter of 2014, equities pulled back around the world, particularly for international developed markets. Portfolios tilted towards small cap and value companies performed worse than portfolios ...Read More

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The Value of Following IFA's Advice

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by Jay D. Franklin and Mark Hebner — Wednesday, October 1, 2014

What is the value of staying invested in a globally-diversified risk-appropriate portfolio regardless of what happens in the financial markets? Admittedly, this is very difficult to quantify because there is ...Read More

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Q&A with IFA: How Well Have the Funds in My 401(k) Performed?

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by Mark Hebner — Tuesday, September 30, 2014

  Question: I was recently informed by my company that the majority of the funds in our 401(k) plan have beaten their benchmarks as of 8/31/2014. I find myself somewhat skeptical. Can you please help me ...Read More

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Hedge Fund Shenanigans Uncovered by the SEC

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by Jay D. Franklin and Mark Hebner — Tuesday, September 30, 2014

While perusing the Wall Street Journal, we came across an article1 (“SEC Criticizes Hedge Funds”) that caught our attention. The Securities and Exchange Commission (SEC) recently completed ...Read More

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The Bond King Leaves PIMCO for Janus Capital

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by Jay D. Franklin and Mark Hebner — Monday, September 29, 2014

We were as shocked as everyone else when we learned that Bill Gross had resigned from PIMCO, and we were doubly shocked to learn that he was going to Janus Capital, a company not known for its bond funds. In ...Read More

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Is Indexing the End of Capitalism? We Don't Think So!

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by Jay D. Franklin and Mark Hebner — Thursday, September 25, 2014

Political commentator Jonathan Russo wrote an interesting article on Huffingtonpost.com called “Indexing and the End of Capitalism.” Although it had a great start by noting the arrival of the ...Read More

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Marlena Lee

How Much Income Do You Need in Retirement?

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by Marlena Lee — Wednesday, September 24, 2014

The answer, of course, is different for every person. In the video, Marlena Lee of Dimensional Fund Advisors explains how someone who is close to retirement can arrive at a reasonable estimate of what they ...Read More

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Frontier Markets—Tread Carefully Says FINRA

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by Jay D. Franklin and Mark Hebner — Monday, September 22, 2014

The frontier markets consist of developing countries that have not yet made it to or have dropped out of the category of emerging markets. Some examples would be Argentina, Lebanon, Nigeria, Slovenia, and ...Read More

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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 ...Read More

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The Dimensions of Stock and Bond Returns

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by Mark Hebner — Wednesday, September 17, 2014

Researchers did not have a very good idea about what sources of investment risk actually produced higher returns until ...Read More

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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