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Tom Allen and Mark Hebner

The Academic Advantage

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 ...Read More

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  • Tom Allen and Mark Hebner

    Bridgeway Capital Management: A Deeper Look at The Performance

    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

    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?

    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?

    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

    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

    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

    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

    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

    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

    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?

    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

    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

    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

    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

    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

  • Tom Allen and Mark Hebner

    SPIVA: Active vs. Passive: 2016 Standard & Poor's Update [VIDEO]

    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

    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?

    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

    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

    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

  • Vanguard vs. Dimensional: Through A Statistical Lens

    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

    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

    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

    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

    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

    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

  • Tom Allen and Mark Hebner

    The Random Walker®, Visualizing How Markets Work

    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

    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

    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

    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

  • Tom Allen and Mark Hebner

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

    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

    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

    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

    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

    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

    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

    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?

    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?

    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

    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

    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

    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

  • Mark Hebner

    Dimensional Fund Advisors: A Deeper Look At The Performance

    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

    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

    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

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

    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 Nothing ...Read More

  • Tom Allen and Mark Hebner

    Putnam Investments: A Deeper Look at the Performance

    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

    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

    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

    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