Articles From Jay D. Franklin (101)


Risk Savvy—How to Make Good Decisions

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


Is There a Manager Risk Premium?

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


A New Low for CNBC

by Jay D. Franklin — Friday, March 21, 2014

With nothing better to do the other night, I decided to try out CNBC’s new series, Money Talks, a reality show that follows the antics of one Steve Stevens and his company VIP Sports of Las Vegas which ...Read More

Jay D. Franklin

Tactical Asset Allocation: The Market-Timing Wolf in Sheep's Clothing

by Jay D. Franklin — Wednesday, January 1, 2014

Borrowing the definition from a recent Vanguard study, "Tactical asset allocation (TAA) is a dynamic strategy that actively adjusts a portfolio's strategic asset allocation (SAA) based on short-term market ...Read More


When It Comes to Investing, Are You Smarter than a Lab Rat?

by Jay D. Franklin — Friday, October 25, 2013

Please don’t be too quick to answer that question in the affirmative. Imagine that you are the subject of the following experiment. You are standing in a room with two doors—door #1 and door #2. In ...Read More


Taking Stock in Pot? Beware!

by Jay D. Franklin — Thursday, August 29, 2013

With medical marijuana now legal in twenty states and recreational marijuana approved in two states, some people may sniff an investment opportunity. Not so fast says the Financial Industry Regulatory ...Read More


What we can learn from a Retiring Market Strategist

by Jay D. Franklin — Monday, May 20, 2013

"Investing is an unusual profession: perhaps the only one where amateurs have a good shot at beating the pros." ...Read More


Memo from the 99% to Goldman: Keep Your Hedge Funds!

by Jay D. Franklin — Friday, May 17, 2013

While scanning my Google Alerts on investment-related articles, Antione Gara’s Goldman Offers Hedge Funds to the 99% grabbed my attention. The article describes Goldman Sachs newly offered Multi-Manager ...Read More


When Is the Right Time to Take Social Security Benefits?

by Jay D. Franklin — Wednesday, May 15, 2013

Americans who are near or in retirement are faced with the vexing question of when to take Social Security benefits. For a married couple, the complexity is multiplied by consideration of spousal benefits and ...Read More


The Capitalism, Inc. Stock Certificate

by Jay D. Franklin — Tuesday, May 14, 2013

At Index Funds Advisors, we are sometimes asked if there is any company whose stock we would recommend buying. Our tongue-in-cheek answer is shown below: The brainchild of IFA’s founder and president, ...Read More


Style Drift on Steroids

by Jay D. Franklin — Tuesday, May 7, 2013

In Step 6 of IFA’s 12-Step Recovery Program for Active Investors, we analyze the problem of style drift, the tendency of active managers to buy securities outside of their mandate. Normally, style drift ...Read More


The Rule of 72: A Mathematical Thing of Beauty

by Jay D. Franklin — Tuesday, April 30, 2013

As an admitted math geek, I never tire of learning new tricks that simplify otherwise complex calculations. Far and away my favorite trick is known as “the rule of 72,” which states that if you are ...Read More


Taking Stock of the STOCK Act

by Jay D. Franklin — Wednesday, April 17, 2013

     In November of 2011, 60 Minutes did an eye-opening expose’ of members of Congress who profited from stock trading based on information.  The truly stunning aspect of this story ...Read More


Vanguard Makes the Case for Indexing

by Jay D. Franklin — Tuesday, April 16, 2013

     As someone who follows the world of passive investing quite closely, one publication that I eagerly await every year is The Case for Index-Fund Investing1 from Vanguard Research. As with ...Read More


Another Arithmetic Lesson from William Sharpe

by Jay D. Franklin — Friday, April 12, 2013

Nobel Laureate William Sharpe is one of the academic linchpins of IFA’s investment philosophy. A year after winning the Nobel Prize in 1990, he penned a brief and elegant article1 showing that as whole, ...Read More


1Q/2013: The Quarter in Review

by Jay D. Franklin — Thursday, April 4, 2013

The first quarter of 2013 was a quarter in which risk was rewarded. Once again, the market climbed a wall of worry centered on government shutdowns and budget sequestrations. On the international front, we ...Read More


What's a Mother to Do?

by Jay D. Franklin — Wednesday, April 3, 2013

Yahoo!'s Daily Ticker is one of the few financial Websites that I make a point to visit on a daily basis. The three to six minute interviews and commentaries are always entertaining and sometimes very ...Read More


Momentum: A Fourth Factor

by Jay D. Franklin — Monday, April 1, 2013

Throughout IFA’s Website, you will find references to the three-factor model formulated by Professors Eugene Fama and Ken French, which says that the expected return of a broadly diversified stock ...Read More


Hedge Funds: A Deeper Look into their Returns

by Jay D. Franklin — Wednesday, March 27, 2013

Despite the dismal results delivered to their investors since inception1, hedge funds have continued to grow, reaching a record $2.25 trillion by the end of 2012, according to Hedge Fund Research2.  At ...Read More


SAC Capital Sets a New Record – but Not One to Boast About

by Jay D. Franklin — Wednesday, March 20, 2013

A story that we have been following for some time now is the SEC/FBI investigation of SAC Capital Advisors for insider trading. On March 15th, a shoe dropped when the SEC announced1,2 a record-setting $616 ...Read More


Dow 20,000? Not Quite Yet!

by Jay D. Franklin — Monday, March 11, 2013

Our latest example of an unfulfilled prediction comes from James Altucher of Formula Capital who stated a year ago on Yahoo's Daily Ticker that the Dow would go to 20,000 within a ...Read More


What Is Your Fund's Active Share, and Should You Care?

by Jay D. Franklin — Monday, March 11, 2013

To borrow from a Vanguard study1, "active share" is defined as the percentage of a portfolio that differs from a benchmark index. It provides a simple measure of the degree of active management in a portfolio ...Read More


Unrealized Capital Gains vs. Investment Gains: An Important Distinction

by Jay D. Franklin — Monday, February 11, 2013

Quite frequently, an IFA advisor or I will speak to a client who thinks he has lost money because of what he sees on an unrealized gains report. Specifically, a position may show an unrealized loss even though ...Read More


Betting Against Buffett: So Far Not So Good

by Jay D. Franklin — Tuesday, February 5, 2013

From the title of this article, you may have thought I was referring to someone who took a short position in Berkshire Hathaway. While I don’t personally know anybody who is crazy enough to have done ...Read More


What Some People Will Do to Beat the Market!

by Jay D. Franklin — Wednesday, January 23, 2013

While hedge funds as a whole have failed to deliver their investors a higher return than T-Bills1, there are a few that have provided above-market returns. One of them is Steven Cohen’s SAC Capital, ...Read More


Economic Forecasting and Market-Timing: Stay Clear of It!

by Jay D. Franklin — Friday, January 18, 2013

Anybody who watches CNBC during market hours gets treated to a litany of economic predictions and their expected impact on market prices. Quite often, you will hear from two different pundits with opposite ...Read More


2012: Another Dismal Year for Active Managers and Market Predictors

by Jay D. Franklin — Friday, January 11, 2013

At Index Funds Advisors, we often counsel investors to avoid a “prediction addiction” and to especially avoid listening to the pundits who are hopelessly addicted. The past calendar year of 2012 ...Read More


2012: The Year in Review

by Jay D. Franklin — Wednesday, January 2, 2013

Unlike 2011, 2012 was a year in which risk was rewarded. It is important to bear in mind that if risk were rewarded every year, it wouldn't be risk and investors would have no right to expect a positive real ...Read More


New Website to Help Stop Investment Scams

by Jay D. Franklin — Friday, December 21, 2012

Today, I found a basis for hope upon reading this press release describing how the Better Business Bureau (BBB) and the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation have teamed ...Read More


Ponzi Schemes After Madoff: A Sad Story Continues

by Jay D. Franklin — Tuesday, December 11, 2012

It has been almost exactly four years since Bernie Madoff was revealed as the operator of the largest Ponzi scheme in history (estimated at $64.8 billion by prosecutors). One might think that with all the ...Read More


Tax Rates and Stock Returns

by Jay D. Franklin — Friday, November 30, 2012

With all the chatter in the financial media about the impending fiscal cliff, investors cannot be blamed for their confusion. Some investors have expressed a concern that an increase in tax rates may result in ...Read More


What a License Plate Reveals

by Jay D. Franklin — Thursday, November 29, 2012

While driving to work today, I was racking my brain for a good topic to write about when suddenly, a black Ferrari convertible zoomed past me. Normally, I would not give that a second thought, but I could not ...Read More


Warren Buffett, Market Efficiency and the Disappearance of Alpha

by Jay D. Franklin — Wednesday, November 7, 2012

As staunch admirers of Warren Buffett, we at IFA can only marvel at the value he has created for his investors over the course of his illustrious career. Anyone fortunate enough to own Berkshire Hathaway since ...Read More


The 7 Most Important Equations for Your Retirement - A New Book by Moshe Milevsky

by Jay D. Franklin — Thursday, November 1, 2012

Anyone who is concerned with retirement would benefit from reading this book. Even the most math phobic among us should not be intimidated by the title. After reading this book, there is simply no excuse for ...Read More


The New UBS Mortgage REIT Leveraged ETN - Taking Risk to Dizzying Heights

by Jay D. Franklin — Friday, October 26, 2012

At Index Funds Advisors, Inc. we have consistently warned investors away from the complex financial products put out by the large Wall Street firms. Most of the "innovation" that occurs in finance is only for ...Read More


The Impact of Bad Investor Behavior

by Jay D. Franklin — Wednesday, October 24, 2012

About a year ago, Professors Brad Barber and Terrance Odean published a survey of studies from around the world (including several of their own) showing the deleterious impact of bad behavior on investors' ...Read More


When Two Minuses Do Not Make a Plus

by Jay D. Franklin — Tuesday, October 23, 2012

As a registered investment advisor, Index Funds Advisors, Inc. is constantly solicited by mutual fund companies and ETF (exchange-traded fund) providers hoping to convince us to use their products for our ...Read More


The Google Earnings Debacle: The Piranhas Attack

by Jay D. Franklin — Friday, October 19, 2012

At Index Funds Advisors, Inc, we often talk about the Efficient Markets Hypothesis which states that current prices incorporate all publicly available information. When new information appears, traders act on ...Read More


Sector Rotation: A Sound Investment Approach or an Exercise in Futility?

by Jay D. Franklin — Wednesday, October 17, 2012

Introduction Recently, many investors have succumbed to one of the siren songs of active investing, sector-picking. They believe that they can predict which industrial sectors will outperform the total market ...Read More


Hedge Fund Warnings from the SEC

by Jay D. Franklin — Monday, October 15, 2012

Anyone who is contemplating investing in a hedge fund would do well to read the SEC's Investor Bulletin: Hedge Funds. This document instructs potential investors to not only read the fund's offering memorandum ...Read More


Beating a Dead Horse

by Jay D. Franklin — Friday, October 12, 2012

Once again, the S&P Indices versus Active Funds (SPIVA®) Scorecard shows the dismal story for active management getting worse and worse. For domestic equity funds in the last 12 months, 86.0% failed to ...Read More


Confusion of Confusions: An adaptation of the classic masterpiece by Joseph Penso (de la Vega) on the 17th century Amsterdam Stock Exchange

by Jay D. Franklin — Tuesday, September 11, 2012

A few weeks ago, I wrote about the origin of stock trading in Amsterdam, so it is only appropriate that I follow up with a blog on the very first book (and still one of the very best) written on investing. ...Read More


A Problem with Jack Bogle? I Don’t Think So!

by Jay D. Franklin — Tuesday, September 11, 2012

For anyone who works in the investment advisory business, particularly on the passive side, John (Jack) Bogle is a name held in the highest esteem. A pioneer in the realm of indexing, the founder and longtime ...Read More


Amsterdam: Where It All Began

by Jay D. Franklin — Monday, August 13, 2012

In his magnificent work, The Birth of Plenty—How the Prosperity of the Modern World Was Created, William Bernstein outlines the four necessary conditions for the massive growth of wealth experienced over ...Read More


Pension-Gate Continues - Maryland has been Called Out

by Jay D. Franklin — Monday, August 6, 2012

Index Funds Advisors, Inc. has repeatedly called attention to the scandalous waste of money on active management by state retirement systems. Last week, The Maryland Public Policy Institute and the Maryland ...Read More


Caught Short! A Saga of Wailing Wall Street

by Jay D. Franklin — Thursday, August 2, 2012

Continuing with our series of blogs on books in the financial humor genre, we will take a quick look at Caught Short—A Saga of Wailing Wall Street by the iconic singer, dancer, actor, comedian, and ...Read More


Where are the Customers’ Yachts? or A Good Hard Look at Wall Street

by Jay D. Franklin — Friday, July 27, 2012

Once in the dear dead days beyond recall, an out-of-town visitor was being shown the wonders of the New York financial district. When the party arrived at the Battery, one of his guides indicated some handsome ...Read More


A Busy Week in the World of High Finance

by Jay D. Franklin — Thursday, June 28, 2012

This is one of those weeks where we have so many juicy stories that I truly don’t know where to begin. How about another Madoff story? At last, we have the long-awaited and so richly deserved punishment ...Read More


Actively Managed Funds Continue to Lose Market Share

by Jay D. Franklin — Wednesday, June 27, 2012

Recently, when I was browsing the Morningstar Website, I stumbled upon a video titled “What’s Driving Investors Away From Actively Managed Funds?” In the interview with Christine Benz, ...Read More


Reaching for Yield: Junk and Other High-Risk Bonds

by Jay D. Franklin — Tuesday, June 26, 2012

In this concluding article in the series exploring different ways investors might attempt to increase the income generated by their portfolios, we look at high-yield bonds. These securities offer a higher ...Read More