Articles (19)

Embarking on a financial plan is like sailing around the world. The voyage won’t always go to plan, and there’ll be rough seas. But the odds of reaching your destination increase greatly if you are prepared, flexible, patient, and well-advised. A mistake many ...Read More

Believe it or not, many plan sponsors of institutional investment plans do not have a reliable benchmark to judge their total performance over time.  How can this be?  What could be more fundamental than the ability to accurately evaluate investment results? Although ...Read More

Imagine after 40 years of being a professional money manager, you look back and say, “I was the chosen one.” Making it through events such as the Oil Crisis of 1973 and the stagflation of the 1970s, to the falling of the Soviet Union, globalization, and Back Friday ...Read More

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

The active fund industry is notorious for deceiving investors. We mean deceitful in terms of not giving investors the full-picture of their particular fund’s performance. To give an analogy, if we told you that we had magical powers that allowed us to make objects fall out ...Read More

As we were enjoying our Thanksgiving Day weekend, this Jason Zweig column in the Wall Street Journal caught our attention.  Zweig quotes Denys Glushkov, a senior researcher at Wharton Research Data Services at the University of Pennsylvania, as saying that only 9.3% of ...Read More

When discussing the issue of style drift with prospective clients, we commonly hear an objection that goes something like, “Why should I care where my fund manager chooses to invest, as long as he is picking the asset class and securities with the highest returns?” ...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

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

Fama and French identified risk factors in 1992 that highly correlate with long-term historical returns, namely company size and value ...Read More

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

Introduction Recently, many investors have succumbed to one of the siren songs of active investing, sector-picking. They believe that they can predict which industrial sectors will outperform the total market either for the short-term or the long-term. Their views are often ...Read More

Is there change on the horizon? A recent article in Bloomberg Businessweek by Charles Stein details the disenchantment investors are experiencing with stock pickers. Mutual funds that invest in domestic equities have experienced a mass exodus of around $8 billion in redemptions ...Read More

Investors who use index-linked exchange-traded funds to slice and dice various parts of the U.S. market can choose from benchmarks from Russell, S&P/Barra, and Dow Jones. ...Read More

The Holy Grail of investing is to develop a methodology that enables an individual to identify, in advance, the top-performing mutual funds. Unfortunately, while it is always easy to identify the top performers after the fact (which is what Morningstar ...Read More

As investors examine year-end performances of their index funds, one measure they should not focus on too closely is tracking error. Keeping a portfolio reasonably close to its intended index is desirable, but experts caution against zealous efforts to ...Read More

What a difference two years can make. In 1999, only 33% of mutual funds were able to beat Standard & Poor's (S&P) 500. In the year 2000, over 72% of all mutual funds managed that task. Nearly half of all funds managed to outgain the S&P 600 Small Cap ...Read More

A doubling of the price-earnings ratio occurs when r-g is cut in half. If r-g is 6%, then the P/E ratio for a stock or index is 16.7. If r-g is 3%, then the P/E ratio is ...Read More

Actively-managed funds often start out as one kind of animal and slowly evolve into something totally different over time. For investors who care about developing asset class portfolios with funds that stay true to their style, this "style drift" is an ...Read More