Articles (64)

JP Morgan publishes their annual “Long-Term Capital Market Assumptions” report every year with the hopes of providing professionals guidance in terms of what we should expect from markets over the next 10 to 15 years. On its face, being able to accurately forecast ...Read More

Most of us remember the days at school when we had our routine fire drill. The fire alarms around the school would ring, we would all calmly and collectedly stand up, form a line, and walk out of the school to a safe place. While I am sure many ...Read More

At about the same time last year we saw the Federal Reserve raise the Federal Funds Rate by 0.25%. In anticipation to the Fed’s announcement, investors took to the markets to try and get ahead in terms of positioning themselves for the change. We wrote an article covering ...Read More

“You make more money selling advice than following it. It’s one of those things we count on in the magazine business—along with the short term memory of our readers.” – Steve Forbes, publisher of Forbes Magazine It is officially that time of the ...Read More

“The more things change, the more they stay the same.” – Jean-Baptiste Alphonse Karr   We have all said it before. Whether it comes to our finances or any other situation that involves what seems like a high degree of uncertainty, we are all predisposed to ...Read More

We recently came across a survey from the asset manager Blackrock that reported the vast majority of investors are fleeing to cash ahead of this year’s general election. Specifically, “three-quarters of Americans believe the election will have a bigger impact on ...Read More

Next month, Americans will head to the polls to elect the next president of the United States. While the outcome is unknown, one thing is for certain: There will be a steady stream of opinions from pundits and prognosticators about how the election will impact the stock market. ...Read More

The active fund industry is a marketing machine; ready to pitch short term outperformance as an indication of manager skill. Investors subsequently make a large allocation to these “winners” and more often than not end up earning less than stellar performance ...Read More

“Insanity: doing the same thing over and over again and expecting different results.” – Albert Einstein Market timing is and has been one of the most disastrous investment ideas to plague our world. This isn’t due to some natural absolute law like ...Read More

One of the most misunderstood tenants of the efficient market hypothesis (EMH) has to do with assumption that all decisions made by market participants are rational. In other words, the millions of people who are buying and selling securities act as robots where they are ...Read More

In a recent interview with CNBC, founder of Vanguard, Jack Bogle, tells investors do just “stand still,” amid the recent 10% drop in US markets. Highlights include maintaining the same savings behavior for retirement plan participants, the superiority of index ...Read More

The New Year is a customary time to speculate. In a digital age, when past forecasts are available online, market and media professionals find it harder to hide their blushes when their financial predictions go awry. But there are ways around that. The ignominy that goes with ...Read More

Well there you have it folks. The Federal Reserve finally took action to increase the Federal Funds Rate. The catastrophe that was anticipated by many financial pundits ended up being what seemed like no news at all. How could this possibly be? While many market participants ...Read More

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

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

Stock prices in markets around the world fluctuated dramatically for the week ended August 27. On Monday, August 24, the Dow Jones Industrial Average fell 1,089 points—a larger loss than the “Flash Crash” in May 2010—before rallying to close down 588. ...Read More

Global markets are providing investors a rough ride at the moment, as the focus turns to China’s economic outlook. But while falling markets can be worrisome, maintaining a longer term perspective makes the volatility easier to handle. A typical response to unsettling ...Read More

It is difficult being a patient investor in a frantic and always available news environment. Everyday we are bombarded with “bad” news media:  Will Greece default on their debt and exit the Euro? Is China’s economy going to slow down? There are even ...Read More

No doubt the recent volatility in the market place has investors unnerved. Friends, family, neighbors, work colleagues, are all giving their opinion on where we stand and what will happen in the near ...Read More

What has been the value of following or not following the advice of Index Fund Advisors (IFA), regardless of what happens in the financial markets? A similar question was addressed by Vanguard Research in their Advisor’s Alpha article, where they estimated ...Read More

Like a slow-motion glacier melting into a rushing river, it would appear that the markets have been swept into a period of heightened global uncertainty driven by a long-looming Greek debt crisis. If you’d like to understand the key factors involved in this economic ...Read More

Many measurements seem random, such as the heights of humans, the length of leaves, the roll of 5 dice, and the change of stock market prices. But when academics, statisticians and mathematicians view the world, they see patterns that others do not ...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

Knowing that we at Index Fund Advisors do not engage in economic forecasting, you can safely assume that the above title is meant to be facetious, just like this Wall Street Journal opinion piece titled “Government Forecasters Might as Well Use a Ouija Board” by ...Read More

“Trying Too Hard” is the title of the 1981 keynote speech delivered by Dean Williams of Batterymarch Financial Management to the Financial Analysts Federation Seminar. Unlike most other investment speeches whose age is measured in decades, this one is 100% relevant ...Read More

As broad market indices such as the S&P 500 have set new record highs in recent weeks, many investors have become apprehensive. They fear another major decline is likely to occur and are eager to find strategies that promise to avoid the pain of an extended downturn while ...Read More

Question: In their book Valuing Wall Street published in early 2000, Andrew Smithers and Stephen Wright claim that the Q ratio popularized by Nobel laureate James Tobin reliably identifies periods of extreme overvaluation and undervaluation in stock prices. ...Read More

Question: Some researchers argue that a market timing strategy based on buy/sell signals generated by a 50- or 200-day moving average offers a more appealing combination of risk and return than a buy-and-hold approach. What is your view? Note: The question above was originally ...Read More

As of today (July 2nd, 2014), the Dow and the S&P 500 Index are flirting with new highs of 17,000 and 2,000, respectively. Both have come a long way from their low points of March 9th, 2009 (6,547 for the Dow and 677 for the S&P 500). While all ...Read More

Take a walk past the financial section of your local newsstand, and you are likely to be greeted with headlines like “Ten Hot Stock Picks for 2014!” or “The Top Ten Mutual Funds to Buy Today!” or getting more directly to the point, “Make Money ...Read More

If you have ever spent any time in a casino, it is likely that you have seen supposedly random events that appeared to be non-random. Perhaps the roulette wheel came up red seven times in a row, for example. If your reaction was to place a large bet on ...Read More

The unusually strong performance of US stocks in 2013 was a welcome surprise for investors who are following a simple buy-and-hold strategy and a source of exasperation for many professionals caught flatfooted by the steady rise in share prices. It was the best year for the ...Read More

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

As of the end of 2013, the S&P 500 Index has not only fully recovered from the 51% drop that began in late 2007 and lasted through March of 2009, it has actually gained 37% beyond the high point in 2007, equating to an annualized return of 5.3%. We ...Read More

“Prediction is very difficult, especially if it’s about the future.” -Nils Bohr   “Stocks are about to plunge, Wells Fargo warns.” According to strategist Gina Martin Adams, the S&P 500 should now be at 1,440, which would be a 16% drop from ...Read More

It’s that time of the year when the talking heads of television and the prognosticators of print issue their sage outlooks for the coming 12 months. While this crystal ball gazing is always entertaining, it becomes even more so a year later. In journalism, this is known as ...Read More

Do you ever have those moments when a flashback occurs, and you recoil from a shiver sent down your spine? I had that moment today when I looked briefly at the 5-year chart of the S&P 500, shown below:   What caused that visceral shiver was not the impressive ...Read More

As we noted in our review of the third quarter, the market essentially shrugged off the government shutdown that began on midnight of September 30th. The far bigger issue appeared to be the looming October 17th deadline for raising the debt ceiling limit. There were a lot of ...Read More

One of our favorite sources of investing-related videos is sensibleinvesting.tv which is operated and financed by Barnett Ravenscroft Wealth Management based in Birmingham, England. We find them to be both highly informative and entertaining as well. One of their recent videos ...Read More

There seems to be universal agreement among investment experts that time picking is futile. Even so, it is not unusual for these same experts to actively tout its ...Read More

The pied pipers of Wall Street do not have a good batting average. No Babe Ruths ...Read More

The literature is full of studies confirming the failure of market timing. All these peer- reviewed research papers share the same conclusion. Forget about trying to time the ...Read More

Big down days and big up days frequently come right next to each other. This is volatility—and it is why you have to stay in the markets to get the markets’ superior ...Read More

The Efficient Market Hypothesis simply states that market prices accurately reflect all available information at all ...Read More

The Random Walk Theory essentially states that there are no discernible patterns in stock market prices. The logic and reasoning goes like ...Read More

Time pickers, also known as market timers, mistakenly think they can predict the future direction of the ...Read More

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

The current financial crisis is a combination of three ill winds that combined to make the “perfect” storm. One ill wind is the bursting of the real estate bubble; the second is the ongoing consequences of the ...Read More

"The investor with a portfolio of sound stocks should expect their prices to fluctuate and should neither be concerned by sizable declines nor become excited by sizable advances. He should always remember that market quotations are there for his ...Read More

William Bernstein's quote conveys two important messages. First, he articulates an investor's inability to successfully profit from predicting the short-term future movements of the stock market. Second, and equally important, Bernstein sheds light on the ...Read More

This witticism uncovered by Burton Malkiel introduces Chapter 11 of his enduring classic A Random Walk Down Wall Street. This section of Malkiel's book rallies support for Eugene Fama's Efficient Market ...Read More

The "Nifty-Fifty" was a group of large-cap growth stocks that became the market's darlings in the late 1960s and into the early 1970s. They were great companies that became known as "one-decision" stocks - stocks that you should buy, no matter how ...Read More

The financial media seems to love to take shots at indexing in bear markets, and now is obviously one of those times. The Wilshire 5000 index, the yardstick for the broad domestic stock market, is down a wrenching 16.60% for the year ending June 2002, ...Read More

On May 14, when the markets shot up for the second day in a row, did you feel an urge to get in on the action? Yes, I know we all have our standard asset allocation related to our age and so forth. And we're supposed to just let it be. But that's like ...Read More

Vanguard's founder denounced the speculative appeal of exchange traded funds before the largest annual US gathering of indexing faithful, who took the message to heart but felt that it understated how speculative interest benefits the long-term ...Read More

After watching today's low closing prices, US equity investors who held onto stocks out of patriotism today might have felt a bit foolish. In reality they did just fine. Everyone in the US market got hit today, and selling on the morning the markets ...Read More

The slowdown in the United States has caused some notable repercussions on the European continent. There are many reasons for the strong ripple effect, including market correlation, the impact of fully globalized industries, and the lack of pragmatism on ...Read More

As of yesterday, the Dow Jones Technology Sector Index was down over 53% for the year, and predicting when the tech sector will actually bottom out seems to be the main hobby of financial writers and pundits these days. Amidst these unhappy times for ...Read More

Yes, the Nasdaq market is down, but here's the multi-trillion dollar question: Is the market down enough? Since its high early in 2000, the Nasdaq 100 Index is down about 50%. Is this correction enough justification for the cuts in sales and estimated ...Read More

It was just this past summer when Templeton Growth saw its lead management duties handed over from Mark Holowesko to Sean Farrington - just its second manager change in the fund's 46-year history. This week, just a few short months later, it was announced ...Read More