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  • Dimensional Fund Advisors

    Mutual Fund Landscape - 2017

    1,005
    by Dimensional Fund Advisors — Thursday, July 27, 2017

    Each year, Dimensional analyzes returns from a large sample of US-based mutual funds. Our objective is to document the power of market prices by assessing fund manager performance relative to index benchmarks. This year’s study updates results through 2016. The evidence ...Read More

  • Tom Allen and Mark Hebner

    Stock Picking Fails in All Types of Markets

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    by Tom Allen and Mark Hebner — Tuesday, June 6, 2017

    A very common sales pitch amongst the active management community is their ability to provide “downside protection” for investors in falling markets. Here is an example from MFS Investment Management and our appropriate response. Given that most investors remember ...Read More

  • Luck vs. Skill Across U.S. Equity Asset Classes

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    by Tom Allen and Mark Hebner — Wednesday, March 15, 2017

    When it comes to analyzing active management performance, it is important to understand the role that luck can play over various time horizons. Given the randomness of markets around the world, there is always a subset of managers who will outperform a given benchmark by chance. ...Read More

  • Markets Are at New Highs: Is a Contraction on the Horizon?

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    by Tom Allen and Mark Hebner — Wednesday, January 11, 2017

    After coming off of a performing 2016 and with certain indices, like the Dow Jones Industrial Average, at or near all-time highs, many investors may be wondering if a market contraction is on the horizon. Unlike many of the professional news pundits who use their ...Read More

  • The Gurudex: How Accurate are the "Experts?"

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    by Tom Allen and Mark Hebner — Friday, November 18, 2016

    It may come as no surprise to anyone who follows us, but just in case you forgot, we don’t think too highly of active management. It is nothing personal, of course. The fact of the matter is that the vast majority is not delivering on their proposed value proposition to ...Read More

  • Jensen Growth Fund Outperformance? It Depends on How You Frame It

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    by Tom Allen and Mark Hebner — Friday, August 26, 2016

    A recent article was published on MarketWatch whose provocative title made our eyebrows rise with curiosity. The title read, “How This Stock Fund Routinely Beats the S&P 500.” Let’s just pause right there for a second. Whether or not the intent of the ...Read More

  • Fortune's Most Admired Companies in 2001 Versus Index Funds

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    by Tom Allen and Mark Hebner — Monday, April 25, 2016

    We analyzed Fortune's "Ten Most Admired Companies" (2001)1 as a whole portfolio and as individual companies, comparing them to 10 index portfolios for the 15-year period from January 2001 through December 2015. The results of the study are shown in the chart below, indicating ...Read More

  • Warren Buffett, Market Efficiency and the Disappearance of Alpha

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    by Tom Allen and Mark Hebner — Wednesday, March 30, 2016

    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 June 1st, 1979 has seen a remarkable 711-fold increase in wealth as ...Read More

  • DoubleLine Equities Growth Fund: Another One Bites the Dust

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    by Tom Allen and Mark Hebner — Monday, March 14, 2016

    We have written extensively about the “stock pickers graveyard,” which is the final resting place for those funds that ended up on the wrong side of Lady Luck. Jeffrey Gundlach, former fund manager and founder of DoubleLine Capital, recently announced that they were ...Read More

  • Oil Prices and Equity Returns

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    by Tom Allen and Mark Hebner — Friday, February 19, 2016

    No doubt one of the biggest stories over the last 18 months has been oil. Currently, oil prices (as measured by the WTI Crude Index) are at levels we haven’t seen for almost 13 years. While many see falling oil prices acting as a tailwind for the overall economy, ...Read More

  • Low Future Economic Growth and Expected Returns

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    by Tom Allen and Mark Hebner — Tuesday, February 16, 2016

    We have recently come across a series of articles that are giving warning about the near future of slowed economic growth, high levels of volatility, and potentially lower returns from stocks and bonds. Although the stories are compelling, we believe that investors should be ...Read More

  • Tom Allen and Mark Hebner

    USAA Mutual Funds: A Deeper Look at Their Performance

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    by Tom Allen and Mark Hebner — Friday, January 22, 2016

    The United Services Automobile Association (USAA) started during the roaring 20’s. Their story began with US Army officers who were refused insurance due to the risky nature of their careers (only 4 years removed from World War I). These men saw a ...Read More

  • A Vanishing Value Premium?

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    by Weston Wellington — Friday, January 22, 2016

    Value stocks underperformed growth stocks by a material margin in the US last year. However, the magnitude and duration of the recent negative value premium are not unprecedented. This column reviews a previous period when challenging performance caused many to question the ...Read More

  • Tom Allen and Mark Hebner

    Thrivent Financial: A Deeper Look at Their Performance

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    by Tom Allen and Mark Hebner — Tuesday, December 15, 2015

    Thrivent Financial is a wonderful story about a non-profit that has done a tremendous job formulating a successful financial planning process. Focusing on the niche clientele of Christians, Thrivent provides a process that incorporates facets of overall wealth management like ...Read More

  • The Devil's Financial Dictionary

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    by Mark Hebner — Monday, December 7, 2015

    Jason Zweig is one of the few financial journalists who writes articles and books that actually contribute an investor's success in capturing the returns that markets have to offer. His books include  ...Read More

  • Second-Hand News

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    by Jim Parker — Friday, December 4, 2015

    Why don’t the media run more good news? One view is bad news sells. If people preferred good news, the media would supply it. But markets don’t see news as necessarily good or bad, rather in terms of what is already built into prices. One academic study appears to ...Read More

  • Tom Allen and Mark Hebner

    The MFS "Active Advantage"... Really?

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    by Tom Allen and Mark Hebner — Wednesday, November 11, 2015

    MFS Investment Management made very well scripted and produced commercials highlighting some of the typical selling points active managers like to make when speaking to investors. Let's take a deeper ...Read More

  • Forty-Two Years of a Random Walk Down Wall Street

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    by Mark Hebner — Thursday, September 3, 2015

    “If one of your New Year’s resolutions is to improve your personal finances, here’s a suggestion: Instead of picking up one of the scores of new works flooding into bookstores, reread an old one: A Random Walk Down Wall Street.” – New York Times If ...Read More

  • Tom Allen and Mark Hebner

    Part 2: Fidelity Funds - A Deeper Look at the Performance

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    by Tom Allen and Mark Hebner — Friday, August 21, 2015

    We recently wrote an article that gave a high level overview of the performance of 64 different equity funds from Fidelity Investments. Our goal was to inform investors to be very careful when they hear “rumors” in the financial media about superior fund families. ...Read More

  • Tom Allen and Mark Hebner

    Part 1: Fidelity Funds - A Deeper Look at the Performance [VIDEO]

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    by Tom Allen and Mark Hebner — Wednesday, August 19, 2015

    It is not uncommon for us to receive questions from clients and prospects about a particular family of mutual funds. The financial media is always quick to highlight top performing managers (here is an example from Money Magazine) to entice investors into hopping on board with a ...Read More

  • How Negative is the Negative-Sum Game of Investing?

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    by Tom Allen and Mark Hebner — Tuesday, August 4, 2015

    In theory, investing is a zero-sum game and in practice it is a negative-sum game. Everyday, millions of individuals transact with one another based on their estimates or perception of where value currently exists in the market. Through this repeated process of voluntary ...Read More

  • Tom Allen and Mark Hebner

    JP Morgan: A Case Study in What is Not a Fiduciary!

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    by Tom Allen and Mark Hebner — Wednesday, July 1, 2015

    The investment advisory industry has grown tremendously in the last 10 years. We are no longer in the simple world of retiring with a pension and not having to worry about making it across the proverbial finish line. Employees and retirees are now facing uncertainty in their ...Read More

  • Evidence-Based Insights: Financial Gurus and Other Unicorns

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    by Mark Hebner — Tuesday, June 16, 2015

    In our last piece, “Ignoring the Siren Song of Daily Market Pricing,” we explored how price-setting occurs in capital markets, and why investors should avoid reacting to breaking news. The cost and competition hurdles are just too tall. Today, we’ll explain why ...Read More

  • Dan Wheeler

    Hedge Funds

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    by Dan Wheeler — Monday, May 11, 2015

    One of the supposed benefits of investing in a Hedge Fund, is the opportunity to make money in both up and down markets.  This goal is appealing to two types of investors.  First, those who do not have the discipline to stick with a “buy and hold” strategy ...Read More

  • What's a Target Date Fund? Your Retirement's Best Friend

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    by Tom Allen and Mark Hebner — Friday, May 8, 2015

    Most days, 24 hours per day is just not enough time to get everything done. Ideally, every adult should be getting an average of 8 hour of sleep, 3 quality meals per day, try to keep it to 2 cups of coffee per day, plus 30 minutes of exercise, ...Read More

  • James Bond. 'Gambler Extraordinaire?'

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    by Christopher Dennistoun — Thursday, May 7, 2015

    "The scent and sweat of a casino are nauseating at three o'clock in the morning...." So begins one of the most celebrated sentences in English popular literature, the opening lines in Casino Royale. Gambling and particularly baccarat, roulette and bridge are Bond's favourite ...Read More

  • Committing Financial Suicide

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    by Tom Allen — Friday, April 24, 2015

    The way I like to think of day trading is that it’s probably the most effective weapon ever to commit financial suicide,…It’s an absolutely lethal way for the typical person to invest because it’s not even really a form of investing, it’s gambling ...Read More

  • DOL's Nod to Passive - A Step Forward For Plan Participants

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    by Tom Allen — Wednesday, April 22, 2015

    "History shows that where ethics and economics come in conflict, victory is always with economics. Vested interests have never been known to have willingly divested themselves unless there was sufficient force to compel them.” – B.R. Ambedkar The Department of Labor ...Read More

  • Cast in Iron

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    by Jim Parker — Monday, April 20, 2015

    The media occasionally locks in on a particular “hot” sector. In the late 1990s, it was technology. In the mid-2000s, it was mining. Writing headlines about fashionable sectors is one thing. Building investment strategies around them is another. A reason journalists ...Read More

  • One More Nail in the Coffin of Active Management

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    by Mark Hebner and IFA Contributors — 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 indices.”               ...Read More

  • Is Skill Dead? Perhaps It Was Never Alive

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    by Mark Hebner and IFA Contributors — 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 ebb and flow of investment style.” Our only argument with that ...Read More

  • Are Stock Pickers Getting Desperate?

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    by Mark Hebner and IFA Contributors — 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 “desperate?” In prior articles such as this one, we have noted how 2014 ...Read More

  • The Sharks Are Biting: Wall Street's Structured Products

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    by Mark Hebner and IFA Contributors — Wednesday, January 14, 2015

    “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

  • No Virginia, There Is No Stock Picking Santa Claus

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    by Mark Hebner and IFA Contributors — Wednesday, December 24, 2014

    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

  • Even More Bad News for Active Managers

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    by Mark Hebner and IFA Contributors — Wednesday, December 10, 2014

    On the heels of this story that we just published regarding the difficult times faced by active managers of large cap funds comes this piece from Reuters which states, “Stock-picking fund managers are testing their investors’ patience with some of the worst ...Read More

  • An Enormous Waste of Money

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    by Mark Hebner and IFA Contributors — Friday, November 28, 2014

    Just how much do investors spend every year on active management fees in pursuit of the ever-elusive alpha? How does $600 billion (or roughly the GDP of Switzerland) grab you? This unfathomably large number appears in a recent whitepaper from State Street’s Center for ...Read More

  • Ebola Stocks: Avoid them like the Plague!

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    by Mark Hebner and IFA Contributors — Wednesday, November 26, 2014

    So says the U.S. Securities and Exchange Commission (SEC) which recently suspended trading for ten business days in the stocks of four companies that claim to be developing products or services in response to the Ebola outbreak. Also, the SEC issued an Investor Alert warning ...Read More

  • When a White Paper Should Be Ignored

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    by Mark Hebner and IFA Contributors — Wednesday, October 22, 2014

    In the investment industry, a claim that is backed up by a white paper takes on an aura of invincibility or unassailability. We at Index Fund Advisors find this to be an unfortunate state of affairs, for as we have previously noted, white papers are not necessarily ...Read More

  • A Second Look at the Indian Mutual Fund Landscape

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    by Mark Hebner and IFA Contributors — Wednesday, October 8, 2014

    About eight months ago, one of our contacts in India (Jatin Visaria) sent us an analysis of fifty of the largest mutual funds domiciled in India that had at least fourteen years of returns data. We published this article discussing the results of that analysis. Recently, Jatin ...Read More

  • The Curse of the Five-Star Rating

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    by Mark Hebner and IFA Contributors — Tuesday, September 16, 2014

    A recent Wall Street Journal article (“Mutual Funds’ Five-Star Curse”, 9/8/2014) should give pause to investors who only pick managers with the coveted five-star rating from Morningstar. As we have pointed out on many occasions, above average performance (which ...Read More

  • Does Past Performance Matter? The View from S&P Dow Jones Indices

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    by Mark Hebner and IFA Contributors — Monday, July 28, 2014

    S&P Dow Jones Indices recently released the latest version of its Persistence Scorecard. Any investor who chooses a fund manager based on performance relative to peers should thoroughly study this report. As with all the previous versions of the report, it showed a lower ...Read More

  • Mark Hebner and IFA Contributors

    Lord Abbett Funds: A Deeper Look at Their Performance

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    by Mark Hebner and IFA Contributors — Friday, June 20, 2014

    On a few occasions, we have been asked by prospective clients about Lord Abbett funds. Like American Funds, they have been around since the Great Depression and are fully dedicated to active management. As of 12/31/2013, they had $137 billion1 of assets under management spread ...Read More

  • Tough Times for the Bond King

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    by Mark Hebner and IFA Contributors — Thursday, June 19, 2014

    While patience is a virtue, it appears to be one that is not possessed by many investors in actively managed funds. It is this difficult lesson that PIMCO’s Bill Gross aka “The Bond King” has had to learn lately. According to this article/video, the PIMCO Total ...Read More

  • The Never-Ending Pursuit of Manager Alpha – Updated

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    by Mark Hebner and IFA Contributors — Wednesday, June 18, 2014

    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

  • A Graphical View of the Mutual Fund Landscape

    7,225
    by Mark Hebner and IFA Contributors — Wednesday, June 11, 2014

    Since IFA began operations in 1999, we have published articles detailing how incredibly stacked the odds are against successfully picking a manager who will beat his benchmark (i.e., deliver alpha). See here and here for recent examples. However, as we like to say at IFA, a good ...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

  • The SAC Insider Trading Scandal—Yet Another Domino Falls

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    by Mark Hebner and IFA Contributors — Thursday, February 6, 2014

    Mathew Martoma, a former SAC Capital Advisors portfolio manager, was convicted today of helping his company earn more than a quarter billion dollars illegally through trades based on material, non-public information about the testing of a potentially promising drug for ...Read More

  • Are Investors Irrational When It Comes to American Funds?

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    by Mark Hebner and IFA Contributors — Monday, February 3, 2014

    A recent edition of the Rekenthaler Report from Morningstar would have us believe that American Funds have suffered investor withdrawals due to a guilt-by-association with active management which has increasingly come under fire from both academia and from key players in the ...Read More

  • The Alleged Inefficiency of Emerging Markets and Other Baloney

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    by Mark Hebner and IFA Contributors — Wednesday, January 29, 2014

    At Index Fund Advisors, we often hear from people all over the world who express an interest in the investment principles that we espouse. This pleases us greatly, as we have always felt that the benefits of index investing should not be limited to American investors. Recently, ...Read More

  • Reality Show for Investors: "Survivor"

    7,256
    by Weston Wellington — Friday, December 20, 2013

    Anyone studying the long-run history of American business cannot help but observe how many of the prominent firms of one era fail to make it to the next. Free-market economies are characterized not only by intense competition but also by disruptive change. Sometimes a ...Read More

  • PIMCO: Just How Consistent is Consistent?

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    by Mark Hebner and IFA Contributors — Wednesday, December 18, 2013

    In Bill Gross’s December 2013 Investment Outlook letter, he joined the ranks of Warren Buffett and Peter Lynch in giving a solid endorsement to indexing while reminiscing about his younger days when Jack Bogle introduced the first index fund available to retail investors: ...Read More