Articles From IFA Contributors (98)

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  • Risk Savvy—How to Make Good Decisions

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    by IFA Contributors — 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 that decade, mathematician John Allen Paulos published a book of that ...Read More

  • Is There a Manager Risk Premium?

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    by IFA Contributors — 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 market risk premium is the expected excess return of the total U.S. ...Read More

  • A New Low for CNBC

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    by IFA Contributors — 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 describes itself as a consulting firm to sports bettors. A ...Read More

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

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    by IFA Contributors — 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 forecasts. Its objective is to systematically exploit inefficiencies or ...Read More

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

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    by IFA Contributors — 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 each trial, you choose a door, and either there will be a $20 ...Read More

  • Taking Stock in Pot? Beware!

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    by IFA Contributors — 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 Authority (FINRA), which issued this press release warning investors of ...Read More

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

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    by IFA Contributors — 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 Alternatives Fund (GMAMX). With more than a hint of cynicism, Gara ...Read More

  • IFA Contributors

    The Capitalism, Inc. Stock Certificate

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    by IFA Contributors — 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, Mark Hebner, Capitalism Inc. neatly summarizes the universe of ...Read More

  • Style Drift on Steroids

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    by IFA Contributors — 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 refers to something like a value fund that dabbles in growth stocks or ...Read More

  • The Rule of 72: A Mathematical Thing of Beauty

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    by IFA Contributors — 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 given an annualized average rate of return of X%, the estimated ...Read More

  • Taking Stock of the STOCK Act

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    by IFA Contributors — 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 was that all of it was perfectly legal since, as the authors of the ...Read More

  • Vanguard Makes the Case for Indexing

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    by IFA Contributors — 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 the Standard and Poor’s Index versus Active (SPIVA) Scorecard2, ...Read More

  • Another Arithmetic Lesson from William Sharpe

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    by IFA Contributors — 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, active investors must do worse than passive investors simply because ...Read More

  • 1Q/2013: The Quarter in Review

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    by IFA Contributors — 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 continued to hear belligerent rhetoric from North Korea's Kim Jong-Un who ...Read More

  • What's a Mother to Do?

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    by IFA Contributors — 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 informative, like this one here. Today's visit greeted me with the following ...Read More

  • Momentum: A Fourth Factor

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    by IFA Contributors — 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 portfolio in excess of a risk-free rate is a function of that ...Read More

  • IFA Contributors

    Hedge Funds: A Deeper Look into their Returns

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    by IFA Contributors — 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 IFA, we have consistently warned investors to steer clear of them, and ...Read More

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

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    by IFA Contributors — 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 million settlement for affiliates of SAC Capital related to trades ...Read More

  • Dow 20,000? Not Quite Yet!

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    by IFA Contributors — 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?

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    by IFA Contributors — 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 at a given point in ...Read More

  • Betting Against Buffett: So Far Not So Good

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    by IFA Contributors — 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 this, at least one person thought it was a good idea. On January ...Read More

  • What Some People Will Do to Beat the Market!

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    by IFA Contributors — 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, which is now the subject of an ongoing FBI/SEC investigation of insider ...Read More

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

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    by IFA Contributors — 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 points of view about the direction of the economy, yet both sound ...Read More

  • 2012: The Year in Review

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    by IFA Contributors — 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

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    by IFA Contributors — 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 up to produce a new Website to combat investment fraud, BBB Smart ...Read More

  • Ponzi Schemes After Madoff: A Sad Story Continues

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    by IFA Contributors — 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 publicity and news coverage, people would have become more cautious and ...Read More

  • Tax Rates and Stock Returns

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    by IFA Contributors — 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 a substantial drop in stock market values or lower expected future ...Read More

  • What a License Plate Reveals

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    by IFA Contributors — 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 help but notice the license plate which displayed an abbreviated ...Read More

  • The Impact of Bad Investor Behavior

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    by IFA Contributors — 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' wealth. To summarize their findings from the conclusion, "They ...Read More

  • When Two Minuses Do Not Make a Plus

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    by IFA Contributors — 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 client’s portfolios. Recently, we were invited to a Webinar on an ...Read More

  • The Google Earnings Debacle: The Piranhas Attack

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    by IFA Contributors — 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 it like a school of piranhas devouring a fresh piece of ...Read More

  • Hedge Fund Warnings from the SEC

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    by IFA Contributors — 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 but also to make sure they understand the fund's investment ...Read More

  • Beating a Dead Horse

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    by IFA Contributors — 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 beat their benchmark. The failure rate for five years is a very ...Read More

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

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    by IFA Contributors — 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 CEO of Vanguard brought low-cost investing to countless investors, ...Read More

  • Amsterdam: Where It All Began

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    by IFA Contributors — 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 the past two centuries: the securing of property rights, the triumph ...Read More

  • Pension-Gate Continues - Maryland has been Called Out

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    by IFA Contributors — 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 Tax Education Foundation issued a report by Jeff Hooke and Michael ...Read More

  • Caught Short! A Saga of Wailing Wall Street

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    by IFA Contributors — 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 songwriter, Eddie Cantor. Published in November of 1929 (one month after ...Read More

  • A Busy Week in the World of High Finance

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    by IFA Contributors — 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 of ten years in the slammer for Peter Madoff, the brother of ...Read More

  • Actively Managed Funds Continue to Lose Market Share

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    by IFA Contributors — 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, Morningstar’s editorial director Kevin McDevitt states: “If you ...Read More

  • Reaching for Yield: Junk and Other High-Risk Bonds

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    by IFA Contributors — 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 coupon payment than Treasuries and investment-grade corporate bonds at the ...Read More

  • When Truth is Stranger than Fiction

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    by IFA Contributors — Monday, June 25, 2012

    Once in a while, when I need a topic to write about, I browse the latest press releases from the Securities and Exchange Commission (SEC). When looking today, however, even I had to do a double-take when I saw the headline, “SEC Charges Florida Broker in Astrology-Based ...Read More

  • Index-Fund Investing: Revisiting a Piece of Investment History

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    by IFA Contributors — Tuesday, June 12, 2012

    In August of 1976, while everyone was dreading the potential epidemic of Legionnaires’ disease, Nobel Laureate Paul A. Samuelson wrote a now famous column in Newsweek titled, “Index-Fund Investing.”1 Samuelson noted the ascendancy of index funds based on ...Read More

  • Naked Short-Selling: Two Big Wall Street Firms Get Exposed

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    by IFA Contributors — Monday, June 4, 2012

    Normally, when you make a mistake, you choke down a slice of humble pie and life goes on. On rare occasion, however, there are mistakes so egregious that you just want to put a bag over your head and pretend that you don’t exist. This must be how the ...Read More

  • IFA’s Concerns with IPOs

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    by IFA Contributors — Thursday, May 24, 2012

    While some may accuse us of hindsight for writing this blog during the unfolding of the Facebook IPO debacle in which $12.8 billion of shareholder value has been wiped out as of 5/23/2012, Index Funds Advisors, Inc. has long advised our clients not to buy IPO shares after they ...Read More

  • A Big Bang for 401(k) Plans?

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    by IFA Contributors — Wednesday, May 23, 2012

    Source: NASA On rare occasions, a change so profound and significant occurs in the financial world that it is given the “big bang” designation. Examples include the 1975 abolition of the fixed rate commission system in the U.S. and the drastic deregulation of the ...Read More

  • Active vs. Passive: A Deeper Look into Fixed Income

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    by IFA Contributors — Tuesday, May 22, 2012

    "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 indices." -Standard & Poors Indices versus Active Funds (SPIVA ®) ...Read More

  • Wall Street: the other Las Vegas

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    by IFA Contributors — Wednesday, May 2, 2012

    About a month ago, I wrote about Nicolas Darvas, a world famous dancer who claimed that he made $2 million in the stock market. This claim was vigorously disputed by the New York State Attorney General, Louis Lefkowitz. A write-up of the allegations against Darvas can be found ...Read More

  • Books of the Doomsday Genre: Read This before You Read One of Them

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    by IFA Contributors — Tuesday, May 1, 2012

    While we at Index Funds Advisors, Inc. do not dismiss the bleak scenario envisioned by the authors of books such as Aftershock or The Day after the Dollar Crashes as completely implausible, there are a number of problems with books of this doomsday genre that deserve ...Read More

  • Exchange-Traded Notes: We Hate to Say We Told You so, but….

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    by IFA Contributors — Thursday, April 19, 2012

    Exchange-traded notes (ETNs) are unsecured-debt instruments that track an index, currency, or a commodity price. According to Morningstar, there are now (as of 2/12/2012) 209 ETNs that hold a total of $17.4 billion in assets, and most of them have appeared in just the last five ...Read More

  • How I made $2,000,000 in the Stock Market

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    by IFA Contributors — Thursday, March 29, 2012

    OK, I confess! I did not make $2 million in the stock market, but that title did catch your attention, did it not? How I made $2,000,000 in the Stock Market is one of the antique books in finance recently acquired by IFA’s ...Read More