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To Margin or Not To Margin?

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by Wes Long and Tom Allen
Tuesday, August 15, 2017

Debt: properly used can be very beneficial, but misused can lead an individual down the path of financial ruin. Many financial firms espouse the benefits of acquiring debt by using securities portfolios as collateral for margin loans. Getting a loan against your securities ...Read More

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  • Tom Allen and Mark Hebner

    Newly Issued Fiduciary Rule Explained

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    by Tom Allen and Mark Hebner — Wednesday, August 9, 2017

    One of the hottest topics in the financial services industry over the last two years has been the Department of Labor’s “Fiduciary Rule” as it applies to retirement assets. There have been many debates in the U.S. Congress and practitioners alike about the ...Read More

  • Tom Allen and Mark Hebner

    Baron Funds: A Deeper Look at the Performance

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    by Tom Allen and Mark Hebner — Tuesday, August 1, 2017

    Ronald Baron is widely known as one of the most successful investors in the U.S. Getting his start in the brokerage industry, Mr. Baron focused on the smaller, less desirable companies that didn’t seem necessarily attractive to most money managers. Finding success early on ...Read More

  • Dimensional Fund Advisors

    Mutual Fund Landscape - 2017

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    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

    The 2nd Quarter of 2017 in Review

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    by Tom Allen and Mark Hebner — Friday, July 21, 2017

    Markets continued their climb during the 2nd Quarter of 2017 with most of the gains coming from outside of the United States. In the U.S., home sales reached highest levels since its peak before the 2008 Financial Crisis, job openings hit hew highs, the unemployment level fell ...Read More

  • Tom Allen and Mark Hebner

    The Academic Advantage

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    by Tom Allen and Mark Hebner — Tuesday, July 18, 2017

    The financial services industry has evolved over the last six decades. What started as essentially a broker or salesman role for getting people access to publicly traded securities has transformed into an academic discipline. We have documented this evolution from its roots with ...Read More

  • Tom Allen and Mark Hebner

    Dividends and the Lag in Fund Values

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    by Tom Allen and Mark Hebner — Monday, July 10, 2017

    As we approach a calendar quarter-end, investors should be expecting both dividend and/or capital gain distributions from their mutual funds. The mechanics may confuse some investors, so we wanted to take the opportunity to review the ...Read More

  • Tom Allen and Mark Hebner

    Bridgeway Capital Management: A Deeper Look at The Performance

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    by Tom Allen and Mark Hebner — Wednesday, July 5, 2017

    Multi-factor investing is slowly becoming a more common investment strategy among professional investment management firms. These firms, more informally known as “quants,” use statistical models to understand the common factors that drive performance in markets ...Read More

  • Dimensional Fund Advisors

    Global Market Breakdown

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    by Dimensional Fund Advisors — Tuesday, June 27, 2017

    The global market breakdown represents the value of capitalism among the U.S., International/Developed, and Emerging Markets around the world. Investors can use the global market breakdown as a starting point in determining their overall equity asset allocation and then make ...Read More

  • Dimensional Fund Advisors

    When Rates Go Up, Do Stocks Go Down?

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    by Dimensional Fund Advisors — Wednesday, June 21, 2017

    Should stock investors worry about changes in interest rates? Research shows that, like stock prices, changes in interest rates and bond prices are largely unpredictable.[1] It follows that an investment strategy based upon attempting to exploit these sorts of changes ...Read More

  • Tom Allen and Mark Hebner

    How Accurate Are JP Morgan's Capital Market Assumptions?

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    by Tom Allen and Mark Hebner — Friday, June 16, 2017

    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

  • 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

  • Tom Allen and Mark Hebner

    Dimensions of Expected Return: Patience is a Virtue – 2017 Update

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    by Tom Allen and Mark Hebner — Monday, May 29, 2017

    Giving investment advice should always aim to meet investors at their level of understanding. We do not expect everyone to have a PhD in Economics, so it is important to focus on big ideas that are the most crucial to understand. This can include ideas such as diversification, ...Read More

  • Tom Allen and Mark Hebner

    Legg Mason: A Deeper Look at the Performance

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    by Tom Allen and Mark Hebner — Wednesday, May 24, 2017

    Legg Mason, Inc. has been a powerhouse in the world of asset management for over a century. Founded in Baltimore, Maryland in 1899, Legg Mason is a publicly traded company (NYSE: LM) manages $710 billion in assets across six continents and employs over 3,400 professionals across ...Read More

  • Tom Allen and Mark Hebner

    The Five Qualifications of a Risk Premium - 2017 Update

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    by Tom Allen and Mark Hebner — Friday, May 19, 2017

    How can we determine whether or not we have identified an exploitable risk premium—a source of higher expected returns that we can implement in our portfolios? To understand the concept of a risk premium, imagine that the only available investment is Treasury Bills, widely ...Read More

  • Tom Allen and Mark Hebner

    Non-Fiduciaries Behaving Badly

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    by Tom Allen and Mark Hebner — Tuesday, May 16, 2017

    It should go without saying that doing business should always involve doing the very best for the person on the other side of the handshake. Unfortunately, this is not a requirement from a legal standpoint. The concept of caveat emptor, or “buyer beware” pervades ...Read More

  • Tom Allen and Mark Hebner

    DALBAR 2016 QAIB: Investors are Still Their Own Worst Enemy

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    by Tom Allen and Mark Hebner — Thursday, May 11, 2017

    DALBAR 2016 QAIB: Investors are Still Their Own Worst Enemy   Tom Allen & Mark Hebner   For 23 years, DALBAR has been publishing their annual Quantitative Analysis of Investor Behavior study that examines investor performance in mutual funds. Their goal is to shed ...Read More

  • Tom Allen and Mark Hebner

    Does Dollar Cost Averaging Really Work?

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    by Tom Allen and Mark Hebner — Monday, May 8, 2017

    Dollar cost averaging is the process of investing a lump-sum of money over a predetermined period of time. For example, let’s say you have $120,000 to invest. You can either invest the entire $120,000 or spread it out over a year - investing $10,000 every month. Here is ...Read More

  • Tom Allen and Mark Hebner

    Cambria Funds: A Deeper Look at the Performance

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    by Tom Allen and Mark Hebner — Tuesday, May 2, 2017

    The explosion in ETFs over the past decade has been substantial. Marrying the ideas of fund management with the ability to trade throughout the day, ETFs have become one of the most popular vehicles utilized by investors. In fact, according to the 2017 Fact Book from the ...Read More

  • The 1st Quarter of 2017 in Review

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    by Tom Allen and Mark Hebner — Thursday, April 27, 2017

    2017 started off on a positive note for global investors. With international and emerging markets leading the way, most global indices on are track for another great year. In the U.S., jobless claims fell to their lowest point since March of 1973, housing starts climbed to their ...Read More

  • The Importance of Global Diversification

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    by Tom Allen and Mark Hebner — Tuesday, April 25, 2017

    Investing, in a nutshell, is really about dealing with risk and uncertainty.  While most of us like to focus on return aspect of investing, it is important to remember that return is only one side of the “investment coin.” Risk and uncertainty is on the other ...Read More

  • Index Fund Advisor's Qualifications

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    by Mark Hebner — Tuesday, April 25, 2017

    The financial advisory business has a very low barrier to entry. Actually, let me rephrase that. It has absolutely NO barrier to entry. Your neighbor, hair stylist, or even your pastor can give financial advice. Deciding which financial advice to follow is the hard part. Believe ...Read More

  • SPIVA: Active vs. Passive: 2016 Standard & Poor's Update

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    by Tom Allen and Mark Hebner — Friday, April 21, 2017

    “Given that active managers’ performance can vary based on market cycles, the newly available 15-year data tells a more stable narrative. Over the 15-year period ending Dec. 2016, 92.15% of large-cap, 95.4% of mid-cap, and 93.21% of small-cap managers trailed their ...Read More

  • iShares vs. Dimensional: Through a Statistical Lens

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    by Tom Allen and Mark Hebner — Tuesday, April 18, 2017

    In Step 11 of the IFA 12-Step Recovery Program for Active Managers we talk about the implementation of our 100 IFA Index Portfolios. As strong proponents of a passive investment strategy, we have options in terms of what strategies we would like to utilize to build our globally ...Read More

  • Are There Potential Downfalls to Passive Investing?

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    by Tom Allen and Mark Hebner — Monday, April 17, 2017

    A recent article from the LA Times highlighted the recent trend of small investors putting more of their retirement savings into passive index funds. Citing multiple statistics from the Investment Company Institute, the rise of passive investing is starting to sweep the nation. ...Read More

  • Tom Allen and Mark Hebner

    AQR: A Deeper Look at the Performance

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    by Tom Allen and Mark Hebner — Friday, April 14, 2017

    Applied Quantitative Research (AQR) was founded in 1998 by Clifford Asness, David Kabiller, Robert Krial, and John Liew. Similar to Dimensional Fund Advisors, AQRs roots stem back to the University of Chicago where Asness, Liew, and Krial originally met when they were doctoral ...Read More

  • Evolution of Financial Research: The Profitability Premium

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    by Dimensional Fund Advisors — Thursday, April 13, 2017

    Since the 1950s, there have been numerous breakthroughs in the field of financial economics that have benefited both society and investors. One early example, resulting from research in the 1950s, is the insight that diversification can increase an investor’s wealth. ...Read More

  • Time for the Fire Drill

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    by Mark Hebner — Monday, April 10, 2017

    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

  • Vanguard vs. Dimensional: Through A Statistical Lens

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    by Tom Allen and Mark Hebner — Monday, April 3, 2017

    As advocates for passive investing, it is a common question amongst clients and prospects about why our 100 IFA Index Portfolios utilize strategies from Dimensional Fund Advisors versus better-known passive fund companies such as Vanguard or iShares. The answer is quite simple: ...Read More

  • Understanding the Limitations of Our Own Faculties

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    by Tom Allen and Mark Hebner — Thursday, March 30, 2017

    “We're blind to our blindness. We have very little idea of how little we know. We're not designed to know how little we know.”– Daniel KahnemanThe Intelligent Investor   Working in the financial services industry has been an interesting adventure. As an ...Read More

  • Separation Between Economics and Markets: An Important Distinction

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    by Tom Allen and Mark Hebner — Tuesday, March 28, 2017

    It should be quite obvious to anyone that economics have an effect on markets. Predictions about employment, GDP growth, inflation, fiscal and monetary policy, trade balance, all have an effect on global enterprise and therefore have an effect on markets. What may not seem as ...Read More

  • What To Do With a Concentrated Stock Position

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    by Derick Kann — Wednesday, March 22, 2017

    Many investors receive company stock or stock options from their employer as part of their overall compensation. What may seem like a small part of their overall portfolio, company stock can become a much larger part of an investor’s overall assets as time goes on, thus ...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

  • Going Global: A Look at Public Company Listings

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    by Dimensional Fund Advisors — Tuesday, March 14, 2017

    Trivia time: how many stocks make up the Wilshire 5000 Total Market Index (a widely used benchmark for the US equity market)? While the logical guess might be 5,000, as of December 31, 2016, the index actually contained around 3,600 names. In fact, the last time this index ...Read More

  • The Random Walker, Visualizing How Markets Work

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    by Tom Allen and Mark Hebner — Wednesday, March 8, 2017

    Since the firm’s founding in 1999, investor education has been one of the cornerstones of our business model. Understanding the link between investment knowledge and risk capacity, our commitment to providing empirical insight to how financial markets work makes our ...Read More

  • Buffett's $1 Million Bet and Why You Should be an Indexer

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    by Tom Allen and Mark Hebner — Monday, March 6, 2017

    Back in 2007, Warren Buffett made a $1 Million bet with Ted Seides from Protégé Partners that a simple index fund will outperform hedge funds over the subsequent 10-year period. We have covered the story of this wager over time here and here. Armed with the ...Read More

  • A Belief in the Law of Small Numbers & The Gambler's Fallacy

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    by Tom Allen and Mark Hebner — Wednesday, March 1, 2017

    We often remind our readers that when dealing with random variables, like returns in the market, it is crucial that you are able to speak the language of statistics, which we call Riskese. In the world of random variables, there is no “black” or ...Read More

  • Investment Shock Absorbers

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    by Jim Parker, Dimensional Fund Advisors — Monday, February 27, 2017

    Ever ridden in a car with worn-out shock absorbers? Every bump is jarring, every corner stomach-churning, and every red light an excuse to assume the brace position. Owning an undiversified portfolio can trigger similar ...Read More

  • The Academic Advantage: The Evidence and Research Behind IFA's Advice

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    by Tom Allen and Mark Hebner — Friday, February 24, 2017

    We take an academic approach to investing at Index Fund Advisors, Inc. We utilize an evidence-based strategy that relies on objective, peer-reviewed research that has been published in academic financial and economic journals. Using this research, we have created portfolios with ...Read More

  • 2017 Contribution Limits

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    by Tom Allen and Mark Hebner — Thursday, February 23, 2017

    The beginning of the year is a great time to remind investors of the contribution limits for various savings vehicles in order for them to maximize their tax-preferential savings and avoiding, what can be, costly penalties. Contribution limits for 2017 for various accounts are ...Read More

  • Index Funds Advisors

    Tax Preparation Documents from Your Custodians

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    by Index Fund Advisors — Thursday, February 9, 2017

    As we start approaching April 18th, we wanted to keep our clients informed of when their 1099 Composites will be available online at Fidelity, TD Ameritrade, and Charles Schwab. The chart below details when tax preparation documents will be available for each custodian: ...Read More

  • Rule or No Rule: You Should Insist on a Fiduciary

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    by Mary Brunson and Mark Hebner — Tuesday, February 7, 2017

    The fiduciary rule issued last year by the Department of Labor (DOL) and backed by the previous administration is now under review at the request of the new administration and implementation may be delayed.   Setting aside the political aspects, let’s focus instead on ...Read More

  • The 4th Quarter and Annual Review of 2016

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    by Mark Hebner — Wednesday, January 25, 2017

    There were a lot of great themes we could take out of 2016. Ideas like diversification and patience when targeting risk premiums all presented themselves this year. First, it is important to remind investors that 2016 had a very tough start. In the month of January, the S&P ...Read More

  • Managing Investor Expectations

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    by Mark Hebner — Wednesday, January 18, 2017

    Expectations can be a double edged sword. On one side, expectations represent what is most likely to take place, which can have practical value when talking about planning for the future. On the other hand, it can also set an “anchor” in the minds of investors, which ...Read More

  • A Look Back at 2016

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    by Weston Wellington — Monday, January 16, 2017

    Every year brings its share of surprises. But how many of us could have imagined that 2016 would see the Chicago Cubs win the World Series, Bob Dylan receive the Nobel Prize in Literature, Donald Trump elected president, and the Dow Jones Industrial Average close out the year a ...Read More

  • Saving for College: Is the 529 Plan Optimal?

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    by Tom Allen and Mark Hebner — Friday, January 13, 2017

    Over the holiday weekend, I was having a discussion with a family member about saving for college given the recent birth of their daughter. This particular family member was looking into a 529 plan, but was concerned about some of the restrictions involved with having a 529. One ...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

  • Why Discipline is So Important for Investors

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    by Tom Allen and Mark Hebner — Tuesday, January 10, 2017

    As we come to the end of the year it is important to reflect on some of the lessons learned from 2016. One of the biggest that comes to mind is the importance of discipline when it comes to investing, especially if you are trying to target specific risk ...Read More

  • Index Funds Advisors

    The Value IFA Brings to Your Personal Finances

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    by Index Fund Advisors — Tuesday, January 10, 2017

    As an investor it is important to understand the value your advisor provides for the fee they are charging you. While many traditional financial firms believe the majority of their value comes in the form of an actively managed investment portfolio attempting to outperform a ...Read More

  • Tom Allen and Mark Hebner

    Alliance Bernstein: A Closer Look at the Performance

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    by Tom Allen and Mark Hebner — Thursday, January 5, 2017

    New York based money manager, Alliance Bernstein, has built a reputation of being one of the leading investment experts. They currently manage $490 Billion in assets, have 47 locations across 21 different countries, have close to 3,500 employees, and is currently traded on the ...Read More

  • Dimensional Fund Advisors: A Deeper Look At The Performance

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    by Mark Hebner — Monday, January 2, 2017

    As many of our readers know, we don’t think too highly of the active mutual fund industry. Not because we have a personal vendetta against them, but because their pursuit of attempting to outperform the market using other investors’ money has only enriched themselves ...Read More

  • Hedge Funds and Fraud: Way to Break the Stereotype

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    by Tom Allen and Mark Hebner — Thursday, December 29, 2016

    Hedge funds have received a pretty bad wrap since the last financial crisis. Some of the big stories that involved illegal behavior on behalf of hedge funds include Dreier LLP, Weavering Capital, Capitol Investments USA, Westgate Capital Management, Petters Group Worldwide, ...Read More

  • Retirement Funds: The "Off Limits" Money

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    by Tom Allen and Mark Hebner — Wednesday, December 28, 2016

    Saving for retirement, let alone saving enough for a retirement, is a difficult endeavor for most investors. With the majority of baby boomers being underfunded for retirement, the overall conclusion that investors having enough knowledge, resources, and will power to prepare ...Read More