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2012: The Year in Review

9,873
by IFA Contributors
Wednesday, January 2, 2013

Unlike 2011, 2012 was a year in which risk was rewarded. It is important to bear in mind that if risk were rewarded every year, it wouldn't be risk and investors would have no right to expect a positive real ...Read More

Article Library

  • New Website to Help Stop Investment Scams

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    by IFA Contributors — Friday, December 21, 2012

    Today, I found a basis for hope upon reading this press release describing how the Better Business Bureau (BBB) and the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation have teamed up to produce a new Website to combat investment fraud, BBB Smart ...Read More

  • Arthur Wiesenberger: The Morningstar of His Day

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    by Mark Hebner and IFA Contributors — Tuesday, December 18, 2012

    A recent addition to IFA's ever-expanding collection of antique finance books is the 1954 edition of Investment Companies by Arthur Wiesenberger. For those who are not familiar with this weighty tome, consider it the Morningstar of that time ...Read More

  • The Nobel Foundation: Isn’t It Ironic…Don’t You Think?

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    by Mark Hebner — Monday, December 17, 2012

    The highly coveted Nobel Prize has been the pinnacle of academic achievement for advances in science and culture. Unfortunately, the Nobel Foundation believes in touting the exact opposite when it comes to the investment strategy for their endowment. In a recent interview with ...Read More

  • Ponzi Schemes After Madoff: A Sad Story Continues

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    by IFA Contributors — Tuesday, December 11, 2012

    It has been almost exactly four years since Bernie Madoff was revealed as the operator of the largest Ponzi scheme in history (estimated at $64.8 billion by prosecutors). One might think that with all the publicity and news coverage, people would have become more cautious and ...Read More

  • Forecasting Stock Market Returns: Why We Don't Do It

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    by Mark Hebner and IFA Contributors — Monday, December 10, 2012

    A recent whitepaper from Vanguard1 analyzed the impact of sixteen different variables on subsequent equity returns. They included everything from the ten-year smoothed price-to-earnings ratio to consensus GDP growth. ...Read More

  • Tax Rates and Stock Returns

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    by IFA Contributors — Friday, November 30, 2012

    With all the chatter in the financial media about the impending fiscal cliff, investors cannot be blamed for their confusion. Some investors have expressed a concern that an increase in tax rates may result in a substantial drop in stock market values or lower expected future ...Read More

  • What a License Plate Reveals

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    by IFA Contributors — Thursday, November 29, 2012

    While driving to work today, I was racking my brain for a good topic to write about when suddenly, a black Ferrari convertible zoomed past me. Normally, I would not give that a second thought, but I could not help but notice the license plate which displayed an abbreviated ...Read More

  • Deja Vu: Sandy and the Great Blizzard of 1888

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    by Mark Hebner — Tuesday, November 6, 2012

    While Sandy was well forecasted, folks back in 1888 had no benefit of foresight. As a result, Northeasterners were caught off-guard that early Sunday morning.  Snow pelted New Jersey, New York, Massachusetts, and Connecticut, leaving many trapped in their homes for a ...Read More

  • The Impact of Bad Investor Behavior

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    by IFA Contributors — Wednesday, October 24, 2012

    About a year ago, Professors Brad Barber and Terrance Odean published a survey of studies from around the world (including several of their own) showing the deleterious impact of bad behavior on investors' wealth. To summarize their findings from the conclusion, "They ...Read More

  • When Two Minuses Do Not Make a Plus

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    by IFA Contributors — Tuesday, October 23, 2012

    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

  • The Google Earnings Debacle: The Piranhas Attack

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    by IFA Contributors — Friday, October 19, 2012

    At Index Funds Advisors, Inc, we often talk about the Efficient Markets Hypothesis which states that current prices incorporate all publicly available information. When new information appears, traders act on it like a school of piranhas devouring a fresh piece of ...Read More

  • VP Dimensional Fund Advisors

    The Top Ten Money Excuses

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    by Jim Parker — Thursday, October 18, 2012

    Human beings have an astounding facility for self-deception when it comes to our own money. We tend to rationalize our own fears. So instead of just recognizing how we feel and reflecting on the thoughts that creates, we cut out the middle man and construct the facade of a ...Read More

  • Hedge Fund Warnings from the SEC

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    by IFA Contributors — Monday, October 15, 2012

    Anyone who is contemplating investing in a hedge fund would do well to read the SEC's Investor Bulletin: Hedge Funds. This document instructs potential investors to not only read the fund's offering memorandum but also to make sure they understand the fund's investment ...Read More

  • Beating a Dead Horse

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    by IFA Contributors — Friday, October 12, 2012

    Once again, the S&P Indices versus Active Funds (SPIVA®) Scorecard shows the dismal story for active management getting worse and worse. For domestic equity funds in the last 12 months, 86.0% failed to beat their benchmark. The failure rate for five years is a very ...Read More

  • Weston Wellington

    Another Wall of Worry

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    by Weston Wellington — Thursday, October 4, 2012

    Investors have been confronted with a steady drumbeat of discouraging news over the past year. It's not difficult to explain why mutual fund investors have generally favored fixed income strategies rather than equities over this past twelve-month ...Read More

  • A Problem with Jack Bogle? I Don't Think So!

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    by IFA Contributors — Tuesday, September 11, 2012

    For anyone who works in the investment advisory business, particularly on the passive side, John (Jack) Bogle is a name held in the highest esteem. A pioneer in the realm of indexing, the founder and longtime CEO of Vanguard brought low-cost investing to countless investors, ...Read More

  • The Economic Consequences of the New Deal

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    by Tyler L. Collins — Friday, September 7, 2012

    Benjamin Stolberg and Warren Jay Vinton wrote The Economic Consequences of the New Deal in 1935. Benjamin Stolberg was a journalist and writer, who mainly focused on the issues of American ...Read More

  • Vice President Dimensional Fund Advisors

    In Other News

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    by Jim Parker — Monday, September 3, 2012

    Bad news sells. It sells because fear is a more powerful emotion than greed. Newspaper editors know that, which is why the front pages are often so depressing. But sometimes you need to dig inside the paper for a more balanced ...Read More

  • Amsterdam: Where It All Began

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    by IFA Contributors — Monday, August 13, 2012

    In his magnificent work, The Birth of Plenty—How the Prosperity of the Modern World Was Created, William Bernstein outlines the four necessary conditions for the massive growth of wealth experienced over the past two centuries: the securing of property rights, the triumph ...Read More

  • Pension-Gate Continues - Maryland has been Called Out

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    by IFA Contributors — Monday, August 6, 2012

    Index Funds Advisors, Inc. has repeatedly called attention to the scandalous waste of money on active management by state retirement systems. Last week, The Maryland Public Policy Institute and the Maryland Tax Education Foundation issued a report by Jeff Hooke and Michael ...Read More

  • Caught Short! A Saga of Wailing Wall Street

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    by IFA Contributors — Thursday, August 2, 2012

    Continuing with our series of blogs on books in the financial humor genre, we will take a quick look at Caught Short—A Saga of Wailing Wall Street by the iconic singer, dancer, actor, comedian, and songwriter, Eddie Cantor. Published in November of 1929 (one month after ...Read More

  • Brad Steiman

    The Greatest Hits of Investing

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    by Brad Steiman — Friday, July 27, 2012

      For more than a decade, I have had the privilege of hearing many colleagues discuss the fundamentals of investing in simple and effective ways. Everyone puts their own words and music to this set of ideas, but the following are what I consider the top ten greatest hits, ...Read More

  • Jim Parker

    The Cost of Safety

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    by Jim Parker — Sunday, July 15, 2012

    Investors are now so risk averse they are willing to pay the German government to look after their money; not a risk-free return, but a return-free risk. Yields on two-year German notes sank to an all-time low of -0.005% on June 1. Looked at another way, anxious investors were ...Read More

  • Pop Quiz

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    by Weston Wellington — Sunday, July 15, 2012

    Question: The twenty-two prominent firms listed below share a common characteristic. What is it? Answer: If you guessed each firm is a constituent of the S&P 500 Index, you would have been close—but ...Read More

  • Brendan Connelly

    Retirement Plan Shadows

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    by Brendan Connelly — Thursday, July 12, 2012

    How to Win Your Battle against the Money Management Machine     "It is difficult to get a man to understand something when his salary depends on his not understanding it." —Upton Sinclair, The Jungle, 1906   "Everyone carries a shadow, and the less it is ...Read More

  • Credit Ratings vs. Market Pricing

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    by Dimensional Fund Advisors — Friday, June 29, 2012

    In the highly competitive financial markets, most "news" has already been incorporated into prices. Dimensional takes advantage of the information embedded in prices, rather than relying on third parties rating ...Read More

  • A Busy Week in the World of High Finance

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    by IFA Contributors — Thursday, June 28, 2012

    This is one of those weeks where we have so many juicy stories that I truly don’t know where to begin. How about another Madoff story? At last, we have the long-awaited and so richly deserved punishment of ten years in the slammer for Peter Madoff, the brother of ...Read More

  • Actively Managed Funds Continue to Lose Market Share

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    by IFA Contributors — Wednesday, June 27, 2012

    Recently, when I was browsing the Morningstar Website, I stumbled upon a video titled “What’s Driving Investors Away From Actively Managed Funds?” In the interview with Christine Benz, Morningstar’s editorial director Kevin McDevitt states: “If you ...Read More

  • Reaching for Yield: Junk and Other High-Risk Bonds

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    by IFA Contributors — Tuesday, June 26, 2012

    In this concluding article in the series exploring different ways investors might attempt to increase the income generated by their portfolios, we look at high-yield bonds. These securities offer a higher coupon payment than Treasuries and investment-grade corporate bonds at the ...Read More

  • Investing Anomalies

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    by Roger Trinwith — Monday, June 25, 2012

    Investing is historically chock-full of strategies based on absurd anomalies. These include the January effect, the Super Bowl Indicator, the Harvard MBA Indicator, and “Sell in May and Go Away.”  If you take a large number of “indicators” (I wince ...Read More

  • When Truth is Stranger than Fiction

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    by IFA Contributors — Monday, June 25, 2012

    Once in a while, when I need a topic to write about, I browse the latest press releases from the Securities and Exchange Commission (SEC). When looking today, however, even I had to do a double-take when I saw the headline, “SEC Charges Florida Broker in Astrology-Based ...Read More

  • "Index Funds" by Mark Hebner - A Gem

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    by Taylor Larimore (guest author) — Tuesday, June 19, 2012

    "Index Funds" by Mark Hebner - A Gem by Taylor Larimore (guest author) Mark Hebner’s updated Index Funds is a beautiful little book full of colorful pictures, complex charts and multi-fund portfolios (not Boglehead simplicity). Mr. Hebner shares my ...Read More

  • Index-Fund Investing: Revisiting a Piece of Investment History

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    by IFA Contributors — Tuesday, June 12, 2012

    In August of 1976, while everyone was dreading the potential epidemic of Legionnaires’ disease, Nobel Laureate Paul A. Samuelson wrote a now famous column in Newsweek titled, “Index-Fund Investing.”1 Samuelson noted the ascendancy of index funds based on ...Read More

  • Naked Short-Selling: Two Big Wall Street Firms Get Exposed

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    by IFA Contributors — Monday, June 4, 2012

    Normally, when you make a mistake, you choke down a slice of humble pie and life goes on. On rare occasion, however, there are mistakes so egregious that you just want to put a bag over your head and pretend that you don’t exist. This must be how the ...Read More

  • Book Collector

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    by Guest Author: Farzam Khassian — Tuesday, May 29, 2012

    Book collector Farzam Khassian shares his thoughts on his hobby of collecting rare investment and financial books. He has collected more than 1,000 financial books over the years and has inspired Mark Hebner to also start collecting these treasures. It is interesting to note ...Read More

  • IFA’s Concerns with IPOs

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    by IFA Contributors — Thursday, May 24, 2012

    While some may accuse us of hindsight for writing this blog during the unfolding of the Facebook IPO debacle in which $12.8 billion of shareholder value has been wiped out as of 5/23/2012, Index Funds Advisors, Inc. has long advised our clients not to buy IPO shares after they ...Read More

  • Jim Parker

    Sharing the Wealth: The Case for Equities

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    by Jim Parker — Thursday, May 24, 2012

    Quiz Question: What do these companies have in common: Whitbread of the United Kingdom, Molson Coors of North America, Qantas of Australia, Honda of Japan, and Adidas of Germany? Yes, they all deliver consumer products and services. Whitbread is in hospitality, Molson Coors is ...Read More

  • A Big Bang for 401(k) Plans?

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    by IFA Contributors — Wednesday, May 23, 2012

    Source: NASA On rare occasions, a change so profound and significant occurs in the financial world that it is given the “big bang” designation. Examples include the 1975 abolition of the fixed rate commission system in the U.S. and the drastic deregulation of the ...Read More

  • Active vs. Passive: A Deeper Look into Fixed Income

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    by IFA Contributors — Tuesday, May 22, 2012

    "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." -Standard & Poors Indices versus Active Funds (SPIVA ®) ...Read More

  • The Terrible, Horrible, Terminal, Apocalyptic National Debt Crisis

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    by Nick Murray — Saturday, May 19, 2012

    Just the other day, I was at a lovely club in downtown Jacksonville, Florida, waiting to speak at a luncheon meeting of about a hundred financial advisors. Suddenly, one of the advisors came bursting out of the room where the audience was finishing their lunch, and accosted me. ...Read More

  • Mal-location of Capital

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    by Roger Trinwith — Wednesday, May 2, 2012

    I used to play a lot of golf, probably far too much. When my friends would ask for advice, the number one question I would get is, “What kind of driver should I buy?” I suppose this was my introduction to the efficient mal-location, excuse me, allocation of capital. ...Read More

  • Wall Street: the other Las Vegas

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    by IFA Contributors — Wednesday, May 2, 2012

    About a month ago, I wrote about Nicolas Darvas, a world famous dancer who claimed that he made $2 million in the stock market. This claim was vigorously disputed by the New York State Attorney General, Louis Lefkowitz. A write-up of the allegations against Darvas can be found ...Read More

  • Books of the Doomsday Genre: Read This before You Read One of Them

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    by IFA Contributors — Tuesday, May 1, 2012

    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 Road to Serfdom

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    by Tyler L. Collins — Sunday, April 29, 2012

    The Road to Serfdom was written by Friedrich von Hayek in 1944. Friedrich von Hayek was a prominent Austrian economist during the twentieth century, and this book was one of his most important ...Read More

  • Weston Wellington

    Where's the Party?

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    by Weston Wellington — Friday, April 20, 2012

    The surge in stock prices around the world in the first quarter serves as a reminder that predicting market trends can be a frustrating business. Six months ago, the outlook for stock prices appeared to be fading from grim to grimmer: Congressional leaders were wrangling ...Read More

  • Exchange-Traded Notes: We Hate to Say We Told You so, but….

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    by IFA Contributors — Thursday, April 19, 2012

    Exchange-traded notes (ETNs) are unsecured-debt instruments that track an index, currency, or a commodity price. According to Morningstar, there are now (as of 2/12/2012) 209 ETNs that hold a total of $17.4 billion in assets, and most of them have appeared in just the last five ...Read More

  • How I made $2,000,000 in the Stock Market

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    by IFA Contributors — Thursday, March 29, 2012

    OK, I confess! I did not make $2 million in the stock market, but that title did catch your attention, did it not? How I made $2,000,000 in the Stock Market is one of the antique books in finance recently acquired by IFA’s ...Read More

  • Betting vs. Investing: What We Can Learn from March Madness

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    by IFA Contributors — Thursday, March 22, 2012

    At Index Funds Advisors, Inc., we often get to see how other people are invested before they become IFA clients. If one of these prospects were to tell us that they own commodity futures as part of their investment portfolio, we would stop them dead in their tracks and inform ...Read More

  • Where the Money Grows

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    by IFA Contributors — Wednesday, March 21, 2012

    “The easiest way into Wall Street is by the Hall of Delusions through which many have entered who forgot to return. That door stands always wide open. No legend of warning affronts the eye. There ought to be one, and it should read: ‘No Safe Conduct ...Read More

  • MF Global and the Meaning of Chutzpah

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    by IFA Contributors — Tuesday, March 20, 2012

    Like schlemiel and schlimazel, chutzpah is one of those Yiddish words that lacks a good English counterpart. A good example of it is the old joke about the guy who kills his parents and then demands leniency because he is now an ...Read More