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Comments on Barron's Dimensional Fund Advisors Profile

by Mary Brunson and Mark Hebner
Friday, January 17, 2014

"Active management is a zero-sum game, and that's before costs. That's not opinion, that's math." --Eugene Fama, 2013 Nobel Prize in Economics, Professor of Finance, Chicago Booth, as quoted in Barron's, "A New Dimension", January 4, 2014   Market Dimensions ...Read More

Article Library

  • A Fascinating PBS Frontline Documentary

    by Mark Hebner and IFA Contributors — Thursday, January 16, 2014

    For the past year, we have been following the story of billionaire Steven Cohen’s SAC Capital, particularly its unprecedented indictment followed by a guilty plea and a record $1.8 billion ...Read More

  • 2013: Another Dismal Year for Hedge Funds

    by Mark Hebner and IFA Contributors — Saturday, January 11, 2014

    “We active folks have done a horrible job of beating the benchmarks.” So says Bob Doll of Nuveen Investments who was recently interviewed by Jeff Macke of Yahoo! Finance’s Breakout. For 2013, there is one group of active managers for whom this was especially ...Read More

  • Asset Location

    by Mark Hebner — Friday, January 10, 2014

    An additional way that a passive advisor can add value is not just asset allocation but asset location. Specifically, for a client that has a mixture of taxable accounts, traditional IRAs, and Roth IRAs, it is often helpful to construct a single portfolio consisting of multiple ...Read More

  • Liquidity: Is It a Risk Factor?

    by Mark Hebner and IFA Contributors — Thursday, January 9, 2014

    According to Investopedia, liquidity is defined as the degree to which an asset can be bought or sold in the market without affecting the asset’s price. If you have ever attempted to sell a large block of a thinly traded stock, then you know what liquidity (or rather ...Read More

  • Surprise! No Selloff in 2013

    by Weston Wellington — Wednesday, January 8, 2014

    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

  • Barron's Article on Dimensional Fund Advisors

    by Mark Hebner and IFA Contributors — Monday, January 6, 2014

    Beverly Goodman of Barron’s was accorded the high honor of being the first reporter to attend one of DFA’s Financial Advisor Colleges. The article that she wrote about her experience, A Different Dimension, shows that it was time well spent. Having the opportunity to ...Read More

  • The 2013 4th Quarter and Year-End Review

    by Mark Hebner and IFA Contributors — Thursday, January 2, 2014

    In the fourth quarter of 2013, risk was rewarded for all classes of equities except REITs, and fixed income remained essentially flat. Once again, there was a lot of discussion surrounding future Fed policy, particularly as it relates to the eventual tapering down of the ...Read More

  • Mark Hebner

    Selecting Investments Part 1

    by Mark Hebner — Thursday, January 2, 2014

    As a fiduciary for its clients, IFA only receives compensation from its clients and is therefore unbiased in its choice of ...Read More

  • Selecting Investments Part 2

    by Mark Hebner — Thursday, January 2, 2014

    IFA has known the DFA leadership since 1999 and they have remained committed to fostering a culture of learning, teamwork, innovation, and dedication to always doing what’s right for ...Read More

  • Probability In Motion

    by Mark Hebner — Wednesday, January 1, 2014

    "The probable is what usually happens." - Aristotle Say "HELLO" to Francis, IFA’s newest probability machine, named after Francis Galton, an English mathematician who was an expert in many scientific fields. (Click here to play the video of Francis in action) ...Read More

  • Standard Deviation

    by Mark Hebner — Wednesday, January 1, 2014

    In the field of finance, standard deviation represents the risk associated with a security (stocks or bonds), or the risk of a portfolio of securities (including actively managed mutual funds, index mutual funds, or ...Read More

  • Tactical Asset Allocation: The Market-Timing Wolf in Sheep's Clothing

    by IFA Contributors — Wednesday, January 1, 2014

    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

  • President Index Funds Advisors

    The Resilience of Capitalism

    by Mark Hebner — Wednesday, January 1, 2014

    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

  • A Retrospective on 2013 Predictions

    by Mark Hebner and IFA Contributors — Tuesday, December 31, 2013

    “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

  • A Difficult Year for Gold and Silver

    by Mark Hebner and IFA Contributors — Thursday, December 26, 2013

    Although we haven't seen too many of them lately, it is easy to recall the advertisements and doomsday books touting gold and silver as investments that inundated ...Read More

  • A Banner Year for Dimensional Fund Advisors

    by Mark Hebner and IFA Contributors — Monday, December 23, 2013

    According to Morningstar’s most recent monthly U.S. Open-End Asset Flows Update, 2013 is shaping up to be DFA’s strongest year ever in terms of net cash flows. As of November 30th, DFA’s one-year inflows were $21.2 billion, of which $2.6 billion came from ...Read More

  • Many Happy Returns

    by Jim Parker — Monday, December 23, 2013

    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

  • The Myth of Fund Ratings

    by Anonymous — Monday, December 23, 2013

    At least 80% of actively managed funds underperform the S&P 500 in any 10 year period—and there are indexes that perform better than the S&P 500. If risk-adjusted returns are taken into account, funds lose out even ...Read More

  • Weston Wellington Talks Nobel Laureates

    by Mark Hebner — Monday, December 23, 2013 Show 17-Weston Wellington Talks Nobel Laureates MH: Hi, I am Mark Hebner, President of Index fund Advisors and welcome to! Today I am here with Weston Wellington-Vice President over at Dimensional Fund Advisors…and Weston has been making several appearances ...Read More

  • Merton Miller

    Two Contrasting Views of Stock Markets

    by Merton H. Miller and Charles W. Upton — Friday, December 20, 2013

    The casino view sees the stock market as largely a place where investors place bets on the near future prices of stocks rather than on the numbers on a roulette wheel or the spots on a pack of ...Read More

  • Reality Show for Investors: "Survivor"

    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

  • The Net Investment Income Tax of the Affordable Care Act

    by Mark Hebner and IFA Contributors — Thursday, December 19, 2013

    At the beginning of 2013, the 3.8% Net Investment Income Tax of Obamacare went into effect. It applies to individuals, estates and trusts that have investment income above certain threshold amounts shown in the table below. Filing Status Threshold Amount (Modified Adjusted Gross ...Read More

  • Mark Hebner and IFA Contributors

    PIMCO: A Deeper Look at the Performance

    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

  • Roth IRA Conversions

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

    For younger investors who expect to be in a higher tax bracket in their retirement years, a Roth IRA can be a very attractive proposition for their retirement savings because the growth is not just tax-deferred but tax-free. In a recent article, we examined the differences ...Read More

  • Harry Markowitz Reflects on Eugene Fama's Nobel Prize

    by Harry M. Markowitz — Wednesday, December 18, 2013

    After Scholes and Merton won the Nobel Prize in Economics for their and Fisher Black’s work on option pricing, whenever I was asked who among financial economists I thought would get the Prize next, Gene Fama topped my list of probable recipients.  Gene is especially ...Read More

  • Fiduciary Duty

    Who is Your Fiduciary?

    by Mark Hebner — Sunday, December 15, 2013

    From Wikipedia, the free encyclopedia A fiduciary (from Latin fiduciarius, meaning "[holding] in trust"; from fides, meaning "faith", and fiducia, meaning "trust") is a legal or ethical relationship of trust between two or more parties. Typically, a fiduciary prudently takes ...Read More

  • The History of Finance in Four Minutes [VIDEO]

    by Mark Hebner and IFA Contributors — Wednesday, December 11, 2013

    Anyone who has paid attention to us at IFA is fully aware of how excited we are about Eugene Fama being awarded the 2013 Nobel Prize in Economic Sciences.  Yesterday, the event reached its culmination in the award ceremony followed by the Nobel Banquet attended by the ...Read More

  • Beating the Market—What's Luck Got to Do with It?

    by Mark Hebner and IFA Contributors — Tuesday, December 10, 2013

    The answer to that question is quite a bit actually, at least according to Nobel Laureate Eugene Fama1 and Ken French. Contrary to the protestations of Robert Olstein as featured in this New York Times article, Fama and French demonstrated that luck plays a very large role in ...Read More

  • Eugene Fama's Nobel Prize Lecture [VIDEO]

    by Mark Hebner and IFA Contributors — Monday, December 9, 2013

    This past Sunday (December 8th), Eugene Fama (along with Robert Shiller and Lars Peter Hansen) delivered his Nobel Prize lecture titled “Two Pillars of Asset Pricing.” This lecture should not to be confused with his acceptance speech which will occur on December ...Read More

  • Interest Rate Expectations

    by Jim Parker — Thursday, December 5, 2013

    Interest rates around the world are at historic lows. They can only go in one direction from here, right? And aren’t rising interest rates bad for bond investors? The truth might surprise you. Central banks in developed economies have injected extraordinary stimulus into ...Read More

  • One Man's Trash—Another Man's Treasure

    by Mary Brunson and IFA Contributors — Tuesday, December 3, 2013

    Lost: An $8 Million Thumb Drive Just how easy is it to lose $8 Million? Easier than you might think if your war chest consists of virtual currency stored on a thumb drive. Just ask James Howells of the UK. You see, Mr. Howells was one of the tech ...Read More

  • Bad Benchmarking and the Creation of False Manager Alpha

    by Mark Hebner and IFA Contributors — Monday, December 2, 2013

    You don’t have to dig too deeply into IFA’s Website to realize that in our opinion, the pursuit of alpha is a fool’s errand that suckers investors into paying the high costs of active management while potentially causing them to miss out on the real source of ...Read More

  • Mark Hebner

    Calculations for t-Statistics

    by Mark Hebner — Monday, December 2, 2013

    In calculating the t-stat, the first step is to determine the excess returns the manager earned above an appropriate ...Read More

  • A New Way of Thinking about Your 401(k)

    by Mark Hebner and IFA Contributors — Monday, December 2, 2013

    Matt Schifrin of Forbes was absolutely correct when he described the retirement crisis as a gigantic socioeconomic problem that should be weighing heavily on policymakers. Schifrin cites Federal Reserve data showing that only 52% of Americans have saved anything for retirement, ...Read More

  • Cash Withdrawal Considerations

    by Mark Hebner — Monday, December 2, 2013

    IFA is often in the position of accommodating regular cash withdrawal by its clients. The question is how to best generate cash for ...Read More

  • A Banner Month for CRSP

    by Mark Hebner and IFA Contributors — Wednesday, November 27, 2013

    As we have discussed in many articles such as this one, the Center for Research in Security Prices (CRSP) is the gold standard of historical financial data and is the foundation upon which modern finance is built. This past October saw several well-deserved milestones for CRSP. ...Read More

  • Using Options for Downside Protection and Additional Income

    by Mark Hebner and IFA Contributors — Monday, November 25, 2013

    Question: If I am concerned about a potential drop in the market, should I buy a put option to protect myself? Also, would it make sense to fund the cost of the put option by selling a call option? Answer: A put option allows you to sell shares at ...Read More

  • Quantitative Easing and Interest Rates

    by Mark Hebner and IFA Contributors — Monday, November 25, 2013

    Question: Should I be concerned about the recent news about the Fed reducing bond buys soon and its effects on my portfolio? Answer: Lately, it seems that a day does not go by without a story like this one which talks about the eventual tapering of the Federal Reserve’s ...Read More

  • Hedging Against Inflation Risk and Speculating About the Fed

    by Mark Hebner and IFA Contributors — Monday, November 25, 2013

    Over the last few years, one of the most consistent questions we have received from both prospects and clients is, “How can I protect myself from high inflation?” Please note that since 1991, there has only been one calendar year (2007) where the rate of inflation ...Read More

  • The Persistent Myth of Active Funds in Bear Markets

    by Mark Hebner and IFA Contributors — Friday, November 22, 2013

    All too often, we hear the refrain that yes, index funds are great for bull markets, but when the next bear market rears its ugly head, you will want to be in active funds because the manager can anticipate the downturn and move at least some of the fund’s ...Read More

  • Vanguard Debunks a Widespread Myth about the Market

    by Mark Hebner and IFA Contributors — Tuesday, November 19, 2013

    For at least the past two decades, we have been hearing about an approaching day of reckoning for the stock market prompted by retiring baby boomers selling their equities to fund their retirement needs. Recall that the baby boomers are defined as those born between 1946 and ...Read More

  • A Second Look at the Mutual Fund Landscape

    by Mark Hebner and IFA Contributors — Tuesday, November 19, 2013

    A few months ago, we published “The Mutual Fund Landscape—Not a Pretty Picture” in which we presented the results of research by Dimensional Fund Advisors (DFA). To summarize, they found that over the ten year period ending 12/31/2012, less than 20% of actively ...Read More

  • A Time to Remember—especially if you are a market timer

    by Mary Brunson — Monday, November 18, 2013

    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

  • A New Type of Treasury

    by Mark Hebner and IFA Contributors — Friday, November 15, 2013

    The upcoming Treasury auction in January of 2014 will be different from past auctions in that it will mark the debut of a new category of Treasury security, Floating Rate Notes (FRNs). The last time that Treasury introduced a new security was in 1997 with the Treasury Inflation ...Read More

  • Differing Types of Retirement Annuity Payouts

    by Mark Hebner and IFA Contributors — Friday, November 15, 2013

    At Index Fund Advisors, we have assisted many clients in making the crucial decision of how to take a payout at retirement—as an annuity or a lump sum. Of course, every client is different, and there is no right or wrong answer. For many investors, taking (or buying) an ...Read More

  • A Summary of the Risks Facing Retirees

    by Mark Hebner and IFA Contributors — Thursday, November 14, 2013

    1)      Inflation Risk—the loss of purchasing power over time. As Moshe Milevsky points out, every person has his or her own unique inflation rate that is determined by the basket of goods and services they purchase. For senior citizens, this ...Read More

  • Chuck Talks to Us about Retirement Planning

    by Mark Hebner and IFA Contributors — Tuesday, November 12, 2013

    OK, so maybe it wasn’t Charles Schwab himself, but Walter Bettinger is the President and CEO of Charles Schwab, and he certainly has the authority to speak to us on Chuck’s behalf. On November 11th, 2013, Mr. Bettinger gave a speech to the National Press Club in ...Read More

  • The Tax Man Cometh

    by Mark Hebner and IFA Contributors — Monday, November 11, 2013

    As fiduciaries for wealth, we at Index Fund Advisors are obligated to do everything we can to maximize our client’s after-tax returns. Please note that this is not always the same thing as minimizing taxes, but with the 2013 increase in tax rates (including the new 3.8% ...Read More

  • The Value of a Second Opinion

    by Mark Hebner and IFA Contributors — Friday, November 8, 2013

    When it comes to our physical health, most of us believe that is our right (and perhaps duty) to get a second opinion when diagnosed with a catastrophic illness, as discussed in this article on Of course, with the new health care law going into effect, this may ...Read More

  • A Guilty Plea and a Record Fine for SAC Capital

    by Mark Hebner and IFA Contributors — Tuesday, November 5, 2013

    Three months ago, we wrote about the unprecedented indictment of SAC Capital, and a few months before that, we wrote about SAC’s record-setting $616 million settlement for insider trading. Today’s guilty plea combined with an additional $1.2 billion of fines was ...Read More

  • The Active Voice is Alive and Well

    by Mark Hebner and IFA Contributors — Tuesday, November 5, 2013

    Recently, we have seen many articles such as this one stating that the passive vs. active debate is over not because passive won but because the indexing advocates have drowned out the proponents of active investing. While there may be times when we wish we had the power to ...Read More

  • If You Can't Beat 'Em, Join 'Em

    by Mary Brunson and Mark Hebner — Monday, November 4, 2013

    "The current understanding of asset prices relies in part on rational investors and their concerns about risk and in part on psychology and behavioral finance." 2013 Nobel Prize Committee Announcement, October 14, 2013   “This year’s Prize in Economic Sciences ...Read More

  • When As Good As It Gets Isn't Good Enough

    by Mark Hebner and IFA Contributors — Friday, November 1, 2013

    One of the accusations constantly levied against 2013 Nobel Laureate Eugene Fama is that he uses his Efficient Market Hypothesis as a justification to denigrate all forms of financial regulation, including regulations governing trading by company insiders. A good example of such ...Read More

  • IRS releases 2014 limits for Retirement Plans and IRAs

    by Jeff Cohen — Friday, November 1, 2013

    The IRS announced that the contribution limits for retirement plans and individual retirement account will remain the same as last year’s limits. There was a small increase to the maximum annual contribution limit to defined contribution plans from $51,000 to $52,000. ...Read More