Articles From Mark Hebner and IFA Contributors (299)

Great-West Financial is a subsidiary of Great-West Life, Co. (TSX: GWO), which itself is a subsidiary of Power Financial Corp. (TSX: POW) based out of Montreal, Quebec, Canada. Great-West Financial is the American market for Great-West Life, Co.’s, selling its investment, ...Read More

Prudential Financial is a Fortune 500 company based out of Newark, New Jersey. Traded on the New York Stock Exchange (NYSE: PRU), Prudential Financial employs over 49,000 people across 40 countries, offers insurance products, wealth management, fund management, and retirement ...Read More

Recently, we received a question from a client that we will paraphrase as follows: “While I know that the returns I have gotten from index funds have beaten the majority of active managers, would I not have been better off in funds like the Fairholme Fund (FAIRX) or the ...Read More

As we have pointed out on many occasions, both stock picking and hiring an active manager to pick stocks on your behalf are mug’s games. While some investors diligently study individual stocks and other investors handsomely pay active managers to deliver alpha (an ...Read More

"Data! Data! Data!" he cried impatiently, "I cannot make bricks without clay!" — The Adventures of Sherlock Holmes, The Adventure of the Copper Beeches - Sir Arthur Conan Doyle, ...Read More

As we approach the three 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 Chicago Booth School of Business and son-in-law, Professor John H. ...Read More

In the first part of this series, we gave an overview of 529 plans and the due diligence that investors should perform before choosing one of them, and in the second part, we looked at the West Virginia Smart529Select plan with its different age-based ...Read More

In the first part of this series, we gave an overview of 529 plans and the due diligence that investors should perform before choosing one of them. One 529 plan that we find particularly attractive is West Virginia’s Smart529 Select savings program that features age-based ...Read More

Saving for a child's college education is inarguably one of the most important objectives for an investor's financial capital. With an inflation rate for college costs that has averaged double that of the Consumer Price Index, investors face a substantial ...Read More

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 very own ...Read More

“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 janitor (Ronald Read) in Brattleboro, Vermont who passed away at the age ...Read More

In the wake of a recent Presidential announcement, mutual fund 12b-1 fees/revenue sharing known as “backdoor payments” as the White House calls them, are under investigation by the Securities and Exchange Commissions (SEC) and the Department of Labor (DOL). ...Read More

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 late to this party severely regretted it as Miller’s ...Read More

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 shunning stock pickers in favor of index funds which have been ...Read More

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 away the highest expense ratio at 1.60%. Setting the minimum investment ...Read More

“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.”               ...Read More

Recently, we came across this working draft of a Morningstar research paper titled “The Impact of Expert Guidance on Participant Savings and Investment Behaviors” which addresses defined contribution retirement plans such as 401(k) plans. In many cases, plan ...Read More

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 active management to passive and quotes Jack Bogle who said, “About ...Read More

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 low-cost index funds from Vanguard, whose founder Jack Bogle played a ...Read More

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 of the leadership of Warren Buffett and Charlie Munger) did not ...Read More

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 ebb and flow of investment style.” Our only argument with that ...Read More

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 and a Master’s Degree in Applied Economics, Mr. Mooreland now ...Read More

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 purports to capture the momentum factor and improve long term performance ...Read More

Around this time last year (i.e. shortly after 12/31/2013), we recall how five-year annualized returns of various mutual funds got a substantial boost not only from adding the good year of 2013 but from dropping the dismal year of 2008. The authors of this study titled ...Read More

A few weeks ago, we published this article about a White House memo in which the Chairman of the Council of Economic Advisers (Jason Furman) recommended that brokers who service retirement accounts be legally required to apply a fiduciary standard of care. On Monday (2/23/2015), ...Read More

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 scientific fields. For those needing a refresher or a first ...Read More

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 (Employee Benefit Research Institute) highlights the consequences that ...Read More

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 Investing Paradox—that qualified investors keep pouring money ...Read More

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 helped to educate his viewers who would otherwise know next ...Read More

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 was identified by Christopher Dennistoun as Richard Alfred Davenport. ...Read More

We recently came across this Investor Bulletin from the U.S. Securities and Exchange Commission that provides valuable information to investors who are looking to minimize the chances of having their accounts hacked. We have summarized the most important tips below. Pick a ...Read More

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 “desperate?” In prior articles such as this one, we have noted how 2014 ...Read More

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 estimate of $2.60. Powered by the newly introduced iPhone 6 and 6 ...Read More

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 investors. Brecht begins with the decision of Washington DC entrepreneur ...Read More

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 abusive trading practices that cost retirement savers billions of ...Read More

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 beneficiary(s) of the trust. However, you may not be aware that ...Read More

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 account in the fund which can be held at a major brokerage firm such as ...Read More

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 for the U.S. large cap component of my portfolio? Our data on the ...Read More

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 enjoy. Will Invest for Food (The Economist, 5/3/2014) This insightful ...Read More

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 best known examples are fundamentally-weighted index funds which also ...Read More

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 Columbia Business School who posted this working paper which is nicely ...Read More

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 paper1 published in 1981 that formally identified the size premium, The ...Read More

There is no arguing the fact that 2014 has been a difficult year for small cap stocks around the world (with the exception of emerging markets) and particularly in the U.S., as shown in the table below: For the U.S., 2014 has been the worst year for small cap ...Read More

“Wall Street is a place where anything that can be sold will be sold”  – Warren Buffett “You are just a buyer of Wall Street’s dreck” – Robert Soros “They [structured products] are horrible investments for retail ...Read More

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 that you have a fundamental obligation to act in the best interests ...Read More

A few days ago, the Financial Industry Regulatory Authority (FINRA) released its 2015 Regulatory and Examination Priorities letter highlighting significant risks and issues that, if not properly addressed, could affect investors and market integrity. Although it comes in a bit ...Read More

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 difference between IFA Index Portfolio 100 (which is the equity component ...Read More

Last year (2014) may someday be considered as the year of the tipping point from active to passive fund management. The Vanguard Group, the world’s largest provider of index mutual funds had record-setting inflows of $216 billion (bringing its assets under management above ...Read More

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 in oil prices, which decreased by about 41% for the quarter. Even ...Read More

A health savings account (HSA) is a tax-advantaged medical savings account for people who are enrolled in a high-deductible health plan (HDHP). For this purpose, an HDHP must have a minimum deductible of $1,250 for individuals or $2,500 for families. When used for its intended ...Read More

At Index Fund Advisors, we often talk about the risk factors that explain the returns of diversified portfolios. In this article, we will explore the technique pioneered1 by Nobel Laureate Eugene Fama and James Macbeth for establishing the existence of a risk factor and ...Read More

Question: Should the bond portion of my portfolio be in bond funds or in a ladder of individual bonds? Answer: Like many things with respect to investing, a case can be made for either side. Any proposed bond allocation decision is simply a trade-off among the objectives of low ...Read More

There is no denying it; we Americans love an underdog, and what better underdog than a 17-year-old high school kid who beats Wall Street at its own game? Or so it seemed according to this fluff piece carried in New York magazine which claimed that the student (whom we ...Read More

Does knowing what happened in the recent past with returns of index funds help you predict the future? We explore that question in the new interactive chart below. It allows you to choose one of four IFA Index Portfolios and one of six time period lengths for a total ...Read More

In the wake of the dot-com bust of the early 2000s, you may recall how we were promised that going forward there would be a “Chinese wall” or a “firewall” between the research and investment banking departments of the Wall Street investment banks that so ...Read More

We have published many articles about the woeful state of financial literacy in America. Just when we thought it could not get any worse, along comes this story from the American College of Financial Services. A little over 1,000 people age 60-75 with at least $100,000 of ...Read More

BrightScope and the Investment Company Institute recently collaborated to produce this report on the current state of 401(k) plans based on BrightScope’s database of over 35,500 plans. As of 6/30/2014, of the $24.0 trillion of U.S. retirement plan assets, 401(k) plans ...Read More

Alexander Friedman of GAM Holding AG recently opined on CNBC.com that (to paraphrase Mark Twain) the recent reports of the demise of active managers are greatly exaggerated. Friedman acknowledges the mass migration from active to passive, noting that passive funds now account ...Read More

Anyone who has spent a significant amount of time on our Website will know that we have nothing but the highest respect for Jack Bogle, the Father of Indexing for Retail Investors. Recently, however, we saw this Bloomberg article where Bogle said that he would not risk investing ...Read More

The capitalization rate (or cap rate) on a real estate investment property is defined as its yearly net income divided by its price. For example, suppose we have two apartment buildings, both of which have net rental income of $1 million. The first one (which we will call ...Read More