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Featured Article

Key Man Risk: Yet Another Reason to Avoid Active Funds

by Jay D. Franklin and Mark Hebner
Monday, March 30, 2015

When discussing the risks of investing in actively managed funds, we have focused on issues related to timing and selection.  Recently, we had a chance to view a report from a prominent investment consultant that was prepared for a major institutional client in our ...Read More


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    The Power of Market Returns

    by Jay D. Franklin and Mark Hebner — Thursday, March 26, 2015

    “Compound interest is the most powerful force in the universe.”    - Albert Einstein While perusing the Wall Street Journal, we came across this delightful article about a retired ...Read More

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    Did Bloomberg Find Another Bill Miller?

    by Jay D. Franklin and Mark Hebner — Tuesday, March 24, 2015

    You may recall that Bill Miller was the fund manager who enjoyed the unparalleled winning streak of beating the S&P 500 Index for fifteen consecutive years ending in 2005. Of course, investors who came ...Read More

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    Book Review: The Great Beanie Baby Bubble

    by Thomas Brunson — Monday, March 23, 2015

    “It had gone from cute to heinous, and there was no good way for it to end”- Zac Bissonnette, New York Times bestselling author  At the height of the late 1990’s tech bubble, speculative ...Read More

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    Yet Another Sign that the Tipping Point Has Arrived

    by Jay D. Franklin and Mark Hebner — Friday, March 20, 2015

    We have spoken several times (see here and here) about the tipping point in the long-term migration from active to passive management. While perusing InvestmentNews, we encountered this article about investors ...Read More

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    Vanguard Wades Deeper into Alternative Investments

    by Jay D. Franklin and Mark Hebner — Thursday, March 19, 2015

    If you find the above title puzzling, then you may not be aware that Vanguard offers a market neutral fund (VMNFX) that engages in a long/short equity strategy. Among all the Vanguard funds, it has far and ...Read More

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    One More Nail in the Coffin of Active Management

    by Jay D. Franklin and Mark Hebner — Tuesday, March 17, 2015

    “The only consistent data point we have observed over a five-year horizon is that a majority of active equity and bond managers in most categories lag comparable benchmark ...Read More

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    Addressing Some Misconceptions about Indexing

    by Jay D. Franklin and Mark Hebner — Wednesday, March 11, 2015

    While Forbes magazine has often carried excellent articles about investing such as this one, we found a recent column from Pamela Rosenau to be disappointing. She begins by noting the mass migration from ...Read More

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    Pension-Gate — More Good News from Pennsylvania

    by Jay D. Franklin and Mark Hebner — Tuesday, March 10, 2015

    A little more than a year ago, we reported on how the stewards of the pension fund for Montgomery County, Pennsylvania came to the wise decision of moving away from high-cost actively managed funds in favor of ...Read More

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    Book Analysis: The Panic of 1837

    by Thomas Brunson — Monday, March 9, 2015

    “Over-trading, speculation, and investments in unproductive undertakings became a dominant note in American society”- Reginald Charles McGrane In his historical novel titled The Panic of 1837, ...Read More

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    Yet More Wisdom from the Oracle of Omaha

    by Jay D. Franklin and Mark Hebner — Friday, March 6, 2015

    One of the things we look forward to at this time of year is the release of Warren Buffett’s annual letter to the shareholders of Berkshire Hathaway, and his 2014 letter (which marks the 50th anniversary ...Read More

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    Weather vs. Climate

    by Jim Parker — Thursday, March 5, 2015

    Notice how TV news bulletins put finance next to the weather report? In each, talking heads point at charts and intone about intraday events that are quickly forgotten. Meanwhile, the long-term wealth building ...Read More

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    Is Skill Dead? Perhaps It Was Never Alive

    by Jay D. Franklin and Mark Hebner — Wednesday, March 4, 2015

    A recently released white paper from GMO titled “Is Skill Dead?” begins with this excellent quote from Jeremy Grantham: “90% of what passes for brilliance or incompetence in investing is the ...Read More

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    The Emotional Investor: An Interesting New Website

    by Jay D. Franklin and Mark Hebner — Tuesday, March 3, 2015

    Recently, we came across which is run by Jay Mooreland who, like Joshua Brown, can be described as a reformed broker. As a holder of the Certified Financial Planner (CFP) designation ...Read More

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    Q&A with IFA: Momentum at the Asset Class Level

    by Jay D. Franklin and Mark Hebner — Monday, March 2, 2015

    Question: I understand that there is evidence that momentum is one contributing factor to long term performance (in addition to the size and value factors). There is a current advisory service (Fundx) that ...Read More

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    Why Does This Machine Simulate Market Returns?

    by Jay D. Franklin and Mark Hebner — Wednesday, February 25, 2015

    Anyone who has visited IFA’s office in Irvine will likely have a fond memory of Francis, IFA’s probability machine, named after Francis Galton, an English mathematician who was an expert in many ...Read More

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    More Bad News on the State of Retirement Readiness

    by Jay D. Franklin and Mark Hebner — Tuesday, February 24, 2015

    A few months ago, we published this article addressing the woefully inadequate level of American financial literacy as it relates to retirement saving and investing. This newly released issue brief from EBRI ...Read More

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    Book Analysis: The Stock Market Crash of 1929

    by Thomas Brunson — Monday, February 23, 2015

    “The crash of 1929 stands out in financial history like a lighted beacon on a hilltop warning of impending trouble”-David V. Axon   In Gordon V. Axon’s book titled The Stock Market Crash ...Read More

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    It's Tax Planning Time For Trusts

    by Randy Gardner and Leslie Daff — Friday, February 20, 2015

    The 39.6% ordinary tax rate and 20% capital gain tax rate enacted by the American Taxpayer Relief Act of 2012 (ATRA) and the 3.8% Medicare investment surtax now apply when trust income exceeds $11,950.  ...Read More

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    Should Hedge Funds Get Away With It? Not on Our Watch!

    by Jay D. Franklin and Mark Hebner — Thursday, February 19, 2015

    The title above is a play on the title of this excellent article from the venerable New Yorker magazine which offers eight possible explanations for what Barry Ritholtz brilliantly calls The Most Fascinating ...Read More

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    Cramer Weighs in on Mutual Funds

    by Jay D. Franklin and Mark Hebner — Wednesday, February 18, 2015

    As you may have guessed or perhaps already have known from articles such as this one or this one, we at Index Fund Advisors, Inc. are not fans of CNBC’s Jim Cramer. While some may claim that he has ...Read More

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    About Those Bulls and Bears

    by Jay D. Franklin and Mark Hebner — Tuesday, February 17, 2015

    In the IFA Library of rare and antique finance-related books, we recently acquired a first edition from 1838 of Sketches of Imposture, Deception and Credulity. Although the author is officially anonymous, he ...Read More

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    Q&A with IFA: Commodities

    by Venkat Yarlagadda — Thursday, February 12, 2015

    Question: Should I have a separate exposure to Commodities in my portfolio? In short, we have concluded that the answer is no, and we will explain why below. Based on returns data for the last 10, 20, 30, 40, ...Read More

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    Are Stock Pickers Getting Desperate?

    by Jay D. Franklin and Mark Hebner — Wednesday, February 11, 2015

    We ask this question after reading this interesting article by David Randall from the Daily Mail. We believe the author was being polite in his word choice of “creative” rather than ...Read More

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    The Analysts Underestimate Apple Again

    by Jay D. Franklin and Mark Hebner — Monday, February 9, 2015

    On 1/27/2015, Apple released a spectacular earnings report for the first quarter of its 2015 fiscal year. Once again, it smashed through the analysts’ predictions, earning $3.06 per share vs. a consensus ...Read More

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    IFA FinPlan: Using the Vault Feature [VIDEO]

    by Mark Hebner — Thursday, February 5, 2015

    Clients who have signed up for IFA FinPlan have the ability to securely store an unlimited number of files. In this article, we will discuss some of the files that you may want to upload to your vault. Please ...Read More

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    Some Sage Advice from the Guardian

    by Jay D. Franklin and Mark Hebner — Monday, February 2, 2015

    The title of this Guardian article by Kira Brecht (“How Highly Paid Wall Street Guys Could Be a Threat to Your Retirement Money”) perfectly summarizes the situation of today’s individual ...Read More

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    A Memo that Should Give Brokers Pause

    by Jay D. Franklin and Mark Hebner — Friday, January 30, 2015

    Recently, a White House memo dated 1/13/2015 from the Chairman of the Council of Economic Advisers (Jason Furman) came to our attention. Co-authored with fellow Council member Betsey Stevenson, it calls out ...Read More

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    Book Analysis: The Story of a Speculator

    by Thomas Brunson — Thursday, January 29, 2015

    “Why, if a speculator won every time, soon he would own everything in the world” -Arthur W. Cutten, veteran wheat pit trader In his autobiographical narrative titled the Story of a Speculator, the ...Read More

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    Understanding Administrative Trustee Services

    by Jay D. Franklin and Mark Hebner — Wednesday, January 28, 2015

    If you have a trust, you are probably familiar with the idea of trustee (which could be yourself) who oversees the administration of the trust and has a fiduciary duty to act in the best interests of the ...Read More

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    Is a Donor Advised Fund Right for You?

    by Jay D. Franklin and Mark Hebner — Tuesday, January 27, 2015

    A donor advised fund (DAF) is a charitable giving vehicle administered by a public charity created to manage charitable contributions on behalf of organizations, families, or individuals. The giver opens an ...Read More

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    Q&A with IFA: Equally-Weighted S&P 500 Index

    by Jay D. Franklin and Mark Hebner — Monday, January 26, 2015

    Question: I have heard that an equally-weighted version (as opposed to the standard market cap-weighted version) of the S&P 500 Index achieves a higher return without additional risk. Should I not use this ...Read More

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    A Look Back at Some Good Articles from 2014

    by Jay D. Franklin and Mark Hebner — Friday, January 23, 2015

    At Index Fund Advisors, we consider 2014 to have been a tipping point year in the migration from active to passive management. Here are some of the articles that helped to convince us of this idea. Please ...Read More

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    Another View of Smart Beta

    by Jay D. Franklin and Mark Hebner — Thursday, January 22, 2015

    As we have stated in prior articles such as this one, smart beta is primarily a marketing term that refers to the attempt to capture risk and return factors beyond beta (overall exposure to the market). The ...Read More

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    It's Now Official: Invest and Relax

    by Jay D. Franklin and Mark Hebner — Wednesday, January 21, 2015

    As we say in Step 12 of IFA’s 12-Step Recovery Program for Active Investors, “Invest and Relax.” We just received confirmation of our advice from Assistant Professor Michaela Pagel of ...Read More

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    The Paper that Formalized the Size Premium

    by Jay D. Franklin and Mark Hebner — Friday, January 16, 2015

    At Index Fund Advisors, we implement portfolios for our clients that are tilted towards the compensated risk and return factors of small cap, value, and profitability. In this article, we will review the ...Read More

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    2014: Patience Pays Off

    by Weston Wellington — Wednesday, January 14, 2015

    Forecasters often cite a figure of 8%–10% as a likely outcome for stock market performance in the year ahead, and 2014 was no exception. As sensible as this may sound, it is worth pointing out that over ...Read More

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    Let the Compounding Effect Work for You

    by Venkat Yarlagadda — Wednesday, January 14, 2015

    “Compound interest is the eighth wonder of the world. He who understands it, earns it…he who doesn’t…pays it.”  – Albert Einstein “Someone is sitting in the ...Read More

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    When the Law Takes a Dim View of Cherry-Picking

    by Jay D. Franklin and Mark Hebner — Tuesday, January 13, 2015

    As the Securities and Exchange Commission admonishes newly-registered investment advisers on its Website, “As an investment adviser, you are a ‘fiduciary’ to your advisory clients. This means ...Read More

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    IFA Index Portfolio 100 vs. the S&P 500 Index [VIDEO]

    by Jay D. Franklin and Mark Hebner — Thursday, January 8, 2015

    There is no arguing the fact that compared to U.S. large company stocks, 2014 was a difficult year globally diversified portfolios tilted towards small cap and value stocks. The table below shows the 2014 ...Read More

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    What Should Investors Do Now? [VIDEO]

    by Venkat Yarlagadda — Thursday, January 8, 2015

    Here is a classic video by Weston Wellington at DFA. During the 2008 market downturn some investors may have questioned the wisdom of their investment strategy. Weston address a number of questions and ...Read More

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    Book Review: Commanding Heights

    by Thomas Brunson — Tuesday, January 6, 2015

    There’s little more frustrating than being stuck in a traffic jam, especially when you’re trying to get somewhere important. The same can be said for the way developing and third-world countries ...Read More

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    IFA FinPlan: A New Technology for IFA Clients [VIDEO]

    by Mark Hebner — Monday, January 5, 2015

    At Index Fund Advisors, we place an extremely high value on being able to see the whole picture of our client’s finances. This goes far beyond just managing their investable assets. Towards that end, ...Read More

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    The Fourth Quarter of 2014 in Review

    by Jay D. Franklin and Mark Hebner — Friday, January 2, 2015

    In the fourth quarter of 2014, domestic equities had a strong showing, but foreign equities pulled back for both international developed and emerging markets. One major market-related story was the steep drop ...Read More

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