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The Hidden Weaknesses of Index Funds – From the Wall Street Journal

3,150
by Tom Allen and Mark Hebner
Tuesday, December 20, 2016

The Wall Street Journal recently published a series of articles under the title “The Passivists.” Highlighting the merits of a passive investment approach, authors tackle topics such as the fruitless endeavor of trying to pick winning stocks to the “Do ...Read More

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  • Tom Allen and Mark Hebner

    Putnam Investments: A Deeper Look at the Performance

    2,237
    by Tom Allen and Mark Hebner — Thursday, December 8, 2016

    Boston based money manager, Putnam Investments, has fallen on some hard times. As reported in the Boston Globe article, on Tuesday the company announced that it is going to cut 115 jobs or about 8% of its workforce given the continued outflow of assets from their firm. Currently ...Read More

  • Uselessness of Market Prediction Using Simple Logic

    1,937
    by Tom Allen and Mark Hebner — Wednesday, December 7, 2016

    “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

  • 10 Reasons Investors Should Switch to Passive From Active

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    by Tom Allen and Mark Hebner — Wednesday, November 30, 2016

    While we believe there are many reasons why investors should look into adopting a passive investment strategy that incorporates buying, holding, and rebalancing a globally diversified portfolio of index funds, here are ten.  1. Markets Are Random: Markets are moved by news ...Read More

  • Targeting Premiums & Diversification

    1,810
    by Tom Allen and Mark Hebner — Tuesday, November 29, 2016

    Diversification provides many benefits for investors. Not only can we increase expected returns for a given level of risk, but we can also increase the reliability of capturing premiums or “dimensions” of expected return. In other words, once we decide that we want ...Read More

  • 2016 Year-End Fund Distributions & Portfolio Management

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    by Tom Allen and Mark Hebner — Monday, November 21, 2016

    At Index Fund Advisors, it is standard operating procedure for us to tailor how we manage client portfolios at year-end in anticipation of dividend and capital gains distributions from the mutual funds that we ...Read More

  • The Gurudex: How Accurate are the "Experts?"

    2,173
    by Tom Allen and Mark Hebner — Friday, November 18, 2016

    It may come as no surprise to anyone who follows us, but just in case you forgot, we don’t think too highly of active management. It is nothing personal, of course. The fact of the matter is that the vast majority is not delivering on their proposed value proposition to ...Read More

  • Active vs. Passive? Choose Both – From the Wall Street Journal

    2,136
    by Tom Allen and Mark Hebner — Wednesday, November 16, 2016

    The Wall Street Journal recently published a series of articles under the title “The Passivists.” Highlighting the merits of a passive investment approach, authors tackle topics such as the fruitless endeavor of trying to pick winning stocks to the “Do Nothing ...Read More

  • Post Election Guidance From IFA – Stay the Course!

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    by Mark Hebner — Wednesday, November 9, 2016

    Most of us woke up this morning with a certain amount of uncertainty hanging over our heads. Similar to what we witnessed during the “Brexit” vote just five month earlier, polls, statisticians, and markets didn’t expect the outcome of this election. As some ...Read More

  • The Dying Business of Picking Stocks – From the Wall Street Journal

    2,477
    by Tom Allen and Mark Hebner — Wednesday, November 9, 2016

    The Wall Street Journal recently published a series of articles under the title “The Passivists.” Highlighting the merits of a passive investment approach, authors tackle topics such as the fruitless endeavor of trying to pick winning stocks to the “Do Nothing ...Read More

  • Trying to Avoid the "This Time Is Different" Mentality

    2,506
    by Mark Hebner — Thursday, November 3, 2016

    “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

  • Financial Planning: The Importance of Asking Why?

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    by Mark Hebner — Thursday, November 3, 2016

    “Why?” It’s the question that our children often use and abuse to the point of our own mental and emotional capacity. While we end up resorting to the very popular choice of last resort -“cause I said so” – I often appreciate curiosity and ...Read More

  • The Power of Markets

    2,460
    by Dimensional Fund Advisors — Tuesday, November 1, 2016

    In 1958, economist Leonard Read published an essay entitled “I, Pencil: My Family Tree as Told to Leonard E. Read.” The essay, narrated from the point of view of a pencil, describes the “complex combination of miracles” necessary to create and bring to ...Read More

  • IFA By the Numbers - 2016

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    by Mark Hebner — Monday, October 31, 2016

    It has become a tradition that we reflect on the prior year by collecting our IFA statistics (or, what has grown to be known as IFA By the Numbers) on the abundance and wealth of information we provide in dedication towards replacing speculation with an ...Read More

  • The Importance of Hiring A Fiduciary as Your Wealth Advisor

    3,056
    by Tom Allen and Mark Hebner — Thursday, October 27, 2016

    Fiduciary: one often in a position of authority who obligates himself or herself to act on behalf of another and assumes a duty to act in good faith and with care, candor, and loyalty in fulfilling the obligation[1] It should go without saying that the financial services ...Read More

  • The Presidential Election and Why the "Price" Is Our Only Crystal Ball

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    by Tom Allen and Mark Hebner — Tuesday, October 25, 2016

    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

  • Your Wealth Advisor: The Educator and the Coach

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    by Mark Hebner — Monday, October 24, 2016

    “Everything Should Be Made as Simple as Possible, But Not Simpler” – Albert Einstein The role of a Wealth Advisor is constantly evolving. Most of our parents remember the days where the majority of “advisors” were simply stockbrokers who earned ...Read More

  • The 3rd Quarter of 2016 in Review [VIDEO]

    2,275
    by Tom Allen and Mark Hebner — Friday, October 21, 2016

    The 3rd Quarter of 2016 was a great example of the disconnect between markets and economies that many often believe are closely tied together. While economic indicators are extremely important in terms of the market’s anticipation of long term growth, the two do not ...Read More

  • Timing Premiums: Why It Is Not A Good Idea

    2,685
    by Tom Allen and Mark Hebner — Friday, October 14, 2016

    Many investors have caught on to the idea of the different dimensions of expected return or “premiums” such as the market, size, relative price (value), profitability, and capital investment factors. We at IFA have long advocated for a passive investment strategy ...Read More

  • Presidential Elections and the Stock Market

    3,589
    by Dimensional Fund Advisors — Monday, October 3, 2016

    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

  • Tom Allen and Mark Hebner

    Withdrawal Rates During Retirement: Are We Being Too Conservative?

    3,785
    by Tom Allen and Mark Hebner — Monday, September 26, 2016

    How much can one afford in retirement? It is the holy grail of retirement planning and has been through multiples evolutions over the last few decades. Why? In short, we are trying to give a solution based on uncertainty about the future. What are returns going to be like ...Read More

  • The Importance of Hiring a Fiduciary

    3,662
    by Tom Allen and Mark Hebner — Wednesday, September 21, 2016

    Index Fund Advisors embraces the responsibility of putting our clients’ best interest first and foremost.  Being beholden to the fiduciary standard of care is not something we see as a barrier, but as a universal standard that should be applied to anyone who engages ...Read More

  • Capturing the Value Premium: Is More Necessarily Better?

    3,671
    by Tom Allen and Mark Hebner — Wednesday, September 14, 2016

    Research over the last 4 decades has revealed a robust and persistent value premium – value stocks have outperformed growth stocks over many time periods and markets worldwide. In its most simplest form, value stocks can be defined as having discounted prices based on some ...Read More

  • Tom Allen and Mark Hebner

    Dreyfus Funds: A Closer Look at the Performance

    3,498
    by Tom Allen and Mark Hebner — Thursday, September 8, 2016

    Jack Dreyfus, also known as “The Lion of Wall Street,” founded Dreyfus Funds in New York City in 1951. A 1964 Life Magazine article attributes Dreyfus as revolutionizing the advertising of mutual funds, which were largely a part of institutional investing (i.e. ...Read More

  • The Law of Large Numbers: Bill Miller's Fall From Grace

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    by Tom Allen and Mark Hebner — Friday, September 2, 2016

    Bill Miller is widely considered one of the most successful investors of all time. At the helm of the Legg Mason Value Trust Fund (LMVTX) for over three decades, he earned the title of legendary by beating the S&P 500 for 15 consecutive years from 1991 through 2005. But ...Read More

  • Jensen Growth Fund Outperformance? It Depends on How You Frame It

    3,456
    by Tom Allen and Mark Hebner — Friday, August 26, 2016

    A recent article was published on MarketWatch whose provocative title made our eyebrows rise with curiosity. The title read, “How This Stock Fund Routinely Beats the S&P 500.” Let’s just pause right there for a second. Whether or not the intent of the ...Read More

  • Luck vs. Skill: An Update!

    4,259
    by Tom Allen and Mark Hebner — Thursday, August 25, 2016

    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

  • Tom Allen and Mark Hebner

    BNY Mellon Mutual Funds: A Deeper Look at the Performance

    4,572
    by Tom Allen and Mark Hebner — Monday, August 15, 2016

    The Bank of New York Mellon, officially, has only been in existence since 2007 from a merger, but its roots span all the way back to the birth of our nation. The Bank of New York was founded 232 years ago by the first US Secretary of the Treasury, ...Read More

  • The 3.8% Medicare Tax: What You Need To Know

    2,762
    by Tom Allen and Mark Hebner — Thursday, August 11, 2016

    On January 1, 2013, the US Government introduced a new Net Investment Income Tax of 3.8%. This tax only affects certain households or individuals that meet certain thresholds of net investment income or modified adjusted gross income ...Read More

  • Index Funds: The Documentary Film

    5,874
    by Mark Hebner — Monday, August 8, 2016

    I am very proud to share this film with you and ask that you help spread the word. I’d also like to thank you for your support, your interest and your encouragement as my dedicated team and I continue to press on in our mission to change the way the world invests—by ...Read More

  • Columbia Funds: A Deeper Look at the Performance

    5,581
    by Tom Allen and Mark Hebner — Thursday, August 4, 2016

    Columbia Management is one of the largest investment management firms in the world. With close to 7 full decades of industry experience and expertise and over 100 individual investment strategies, Columbia has become a staple within the fund industry. As of year-end 2015, their ...Read More

  • The 2nd Quarter of 2016 in Review [VIDEO]

    7,055
    by Tom Allen and Mark Hebner — Tuesday, July 26, 2016

    The second quarter of 2016 was mixed in terms of good and bad news as well as performance. While the Eurozone experienced a big shock in terms of the unanticipated “Brexit” vote, the United States experienced falling jobless claims, increasing in consumer prices, and ...Read More

  • Closing the Behavior Gap

    6,414
    by Tom Allen and Mark Hebner — Monday, July 25, 2016

    “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

  • Tom Allen and Mark Hebner

    Dodge & Cox: A Deeper Look at the Performance

    6,204
    by Tom Allen and Mark Hebner — Thursday, July 7, 2016

    San Francisco based Dodge & Cox is one of the most well-known investment management firms in the world. More impressively, they have been able to build a very sizeable asset base on the back of just 6 mutual funds. According to Morningstar, total assets under management as ...Read More

  • Brian Schroeder

    Benchmark Linking: What Plan Sponsors Should Know

    3,302
    by Brian Schroeder — Friday, July 1, 2016

    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

  • Market Efficiency & Behavioral Biases

    4,266
    by Tom Allen and Mark Hebner — Tuesday, June 28, 2016

    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

  • UK's EU Referendum Result

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    by Dimensional Fund Advisors — Friday, June 24, 2016

    On June 23, citizens of the United Kingdom voted to leave the European Union. While there has been much speculation leading up to and since the vote, many of the longer-term implications of the referendum remain unclear, as the process for negotiating what a UK exit may look ...Read More

  • Maryland Public Pension: A Case Study on How to Waste Money

    4,056
    by Tom Allen and Mark Hebner — Wednesday, June 22, 2016

    Public pensions have a very simple purpose: to help serve the many public employees and their retirement. What they have turned into is a shining example of wasting taxpayer money. The Washing Post recently published an article highlighting the $320 million in fees that the ...Read More

  • Pensions Unaware Hidden Real Estate Fees Dwarf Those Disclosed

    3,310
    by Edward Siedle, Founder, BenchmarkAlert.com — Tuesday, June 21, 2016

    In recent years, following a decade-long gorging on hedge and private equity funds by government pensions, the massive hidden fees and expenses related to these "alternative" investment funds have attracted greater scrutiny. Despite initial skepticism, it is now widely ...Read More

  • Bond Funds or Individual Bonds? What You Need To Know

    3,576
    by Tom Allen and Mark Hebner — Friday, June 17, 2016

    A common question we receive from clients has to do with bond strategies. Should we buy bond funds or build individual bond ladders? There are a few things to keep in mind when thinking the role of fixed income from a portfolio standpoint. As an investment advisor, we think ...Read More

  • False Diversification

    4,327
    by Tom Allen and Mark Hebner — Wednesday, June 15, 2016

    As proponents of globally diversified portfolios, we understand the principle of diversification when it comes to investing. Harry Markowitz was one of the first academics to identify the benefits of adding additional assets to a portfolio. In theory, assets with different ...Read More

  • Tom Allen and Mark Hebner

    Vanguard's Active Funds: A Deeper Look at the Performance

    13,231
    by Tom Allen and Mark Hebner — Tuesday, June 7, 2016

    Vanguard is the largest fund management company in the world. Mostly known for being a pioneer in the development of index funds, they also carry quite a few actively managed funds in their lineup.                      ...Read More

  • Eugene Fama: One of A Kind

    10,453
    by Tom Allen and Mark Hebner — Monday, June 6, 2016

    Academics are a hallmark of the investment strategy that we recommend to our clients. While there are plenty of sales pitches professing some sort of new or “hot” idea on how to get rich quick, we rely on peer-reviewed academic research to guide the decisions that we ...Read More

  • Index Reconstitution: The Price of Tracking

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    by Dimensional Fund Advisors — Thursday, June 2, 2016

    With the annual reconstitution of the Russell indices approaching, it is a good opportunity to revisit how index reconstitution events affect trading costs and returns. Index funds are an innovative solution for investors that provide diversified investments at low fees. On any ...Read More

  • Tom Allen and Mark Hebner

    Invesco: A Deeper Look At the Performance

    7,407
    by Tom Allen and Mark Hebner — Wednesday, June 1, 2016

    Invesco Ltd. is one of the most well-known investment firms in the country. Their operations span over 20 different countries around the world and are involved in investment management, wealth management, banking, and alternative ...Read More

  • Tom and Becky

    Volatility... Is There More of it Today?

    4,257
    by Tom Allen and Becky Vasquez — Wednesday, May 25, 2016

    If you follow the stock market, you cannot get away from the word volatility.  It is discussed in the media, over the Internet, the front page of the newspaper’s Business section.  All you have to do is Google “today’s volatility” and you will ...Read More

  • Tom Allen and Mark Hebner

    T. Rowe Price: A Deeper Look at the Performance

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    by Tom Allen and Mark Hebner — Thursday, May 19, 2016

    T. Rowe Price has clearly stated their value proposition to their investors. But what exactly is that value and, more importantly, who is receiving the bulk of that value?                               ...Read More

  • Tom and Denise

    Reverse Mortgages: What You Need to Know

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    by Tom Allen and Denise Delaney — Tuesday, May 17, 2016

    There has been a sharp rise in the reverse mortgage market in last the decade within the United States. According to the National Reverse Mortgage Lenders Association (NRMLA), the annual number of reverse mortgage loans issued has grown from 157 in 1990 to over 58,000 in 2015. ...Read More

  • Family Limited Partnerships: What You Need To Know

    4,457
    by Tom Allen and Mark Hebner — Tuesday, May 10, 2016

    Wealth transfer strategies are an extremely important topic when it comes to financial planning. Establishing the proper legal conduits to ensure the maximum amount assets transferred to beneficiaries according to a client’s best wishes is one of the biggest value ...Read More

  • The Matrix Book: A DFA Tradition [VIDEO]

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    by Mark Hebner and IFA Contributors — Friday, May 6, 2016

    "Data! Data! Data!" he cried impatiently, "I cannot make bricks without clay!" — The Adventures of Sherlock Holmes, The Adventure of the Copper Beeches - Sir Arthur Conan Doyle, ...Read More

  • The Small-Cap "Alpha" Myth: An Update!

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    by Tom Allen and Mark Hebner — Wednesday, April 27, 2016

    There is a common misconception about “alpha” in the small-cap market within the United States. Many professionals believe that once we step out of the mega-cap world of companies like Google, Wal-Mart, Coca-Cola, and Apple where there is an army of analysts digging ...Read More

  • Fortune's Most Admired Companies in 2001 Versus Index Funds

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    by Tom Allen and Mark Hebner — Monday, April 25, 2016

    We analyzed Fortune's "Ten Most Admired Companies" (2001)1 as a whole portfolio and as individual companies, comparing them to 10 index portfolios for the 15-year period from January 2001 through December 2015. The results of the study are shown in the chart below, indicating ...Read More