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Featured Article

Key Man Risk: Yet Another Reason to Avoid Active Funds

68
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

Archive

  • 1301

    The Power of Market Returns

    518
    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

  • 1299

    Did Bloomberg Find Another Bill Miller?

    641
    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

  • 1298

    Book Review: The Great Beanie Baby Bubble

    1,817
    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

  • 1297

    Yet Another Sign that the Tipping Point Has Arrived

    589
    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

  • 1296

    Vanguard Wades Deeper into Alternative Investments

    406
    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

  • 1294

    One More Nail in the Coffin of Active Management

    1,200
    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

  • 1291

    Addressing Some Misconceptions about Indexing

    803
    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

  • 1290

    Pension-Gate — More Good News from Pennsylvania

    967
    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

  • 1289

    Book Analysis: The Panic of 1837

    1,574
    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

  • 1288

    Yet More Wisdom from the Oracle of Omaha

    1,056
    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

  • 1287

    Weather vs. Climate

    776
    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

  • 1286

    Is Skill Dead? Perhaps It Was Never Alive

    983
    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

  • 1285

    The Emotional Investor: An Interesting New Website

    815
    by Jay D. Franklin and Mark Hebner — Tuesday, March 3, 2015

    Recently, we came across theemotionalinvestor.org 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

  • 1284

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

    524
    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

  • 1281

    Why Does This Machine Simulate Market Returns?

    975
    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

  • 1280

    More Bad News on the State of Retirement Readiness

    3,270
    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

  • 1279

    Book Analysis: The Stock Market Crash of 1929

    2,229
    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

  • 1278

    It's Tax Planning Time For Trusts

    582
    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

  • 1277

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

    783
    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

  • 1276

    Cramer Weighs in on Mutual Funds

    865
    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

  • 1275

    About Those Bulls and Bears

    623
    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

  • 1273

    Q&A with IFA: Commodities

    815
    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

  • 1272

    Are Stock Pickers Getting Desperate?

    929
    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

  • 1270

    The Analysts Underestimate Apple Again

    755
    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

  • 1268

    IFA FinPlan: Using the Vault Feature [VIDEO]

    801
    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

  • 1267

    Some Sage Advice from the Guardian

    953
    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

  • 1266

    A Memo that Should Give Brokers Pause

    830
    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

  • 1265

    Book Analysis: The Story of a Speculator

    1,388
    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

  • 1264

    Understanding Administrative Trustee Services

    721
    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

  • 1263

    Is a Donor Advised Fund Right for You?

    747
    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

  • 1262

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

    869
    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

  • 1260

    A Look Back at Some Good Articles from 2014

    843
    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

  • 1259

    Another View of Smart Beta

    781
    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

  • 1258

    It's Now Official: Invest and Relax

    917
    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

  • 1256

    The Paper that Formalized the Size Premium

    1,083
    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

  • 1254

    2014: Patience Pays Off

    1,388
    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

  • 1253

    Let the Compounding Effect Work for You

    962
    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

  • 1250

    When the Law Takes a Dim View of Cherry-Picking

    1,305
    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

  • 1248

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

    2,949
    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

  • 1247

    What Should Investors Do Now? [VIDEO]

    1,187
    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

  • 1245

    Book Review: Commanding Heights

    1,238
    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

  • 1244

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

    3,662
    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

  • 1243

    The Fourth Quarter of 2014 in Review

    1,505
    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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