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Larry Swedroe

Active Small-Cap Managers Add Value: Myth or Reality?

by Larry Swedroe
Thursday, May 30, 2002

One of the more persistent claims from Wall Street is that the inefficiency of information in small-cap stocks allows active managers to exploit market mispricings and outperform passive benchmarks. It is important to note that part of this claim is true ...Read More

Article Library

  • John Spence

    SEC Clears the Way for Fixed-Income ETFs

    by John Spence — Wednesday, May 29, 2002

    In an open meeting, the Securities & Exchange Commission today gave the initial go-ahead to Barclays Global Investors to launch domestic fixed-income exchange-traded funds. Barring a hearing on the matter, in 25 days the SEC will issue orders granting BGI ...Read More

  • Dunn's Law Revisited

    by Frank Armstrong — Thursday, May 23, 2002

    Occasionally even serious financial columns mention Dunn's Law as if it were an accepted economic maxim. It isn't, and it's dangerous to pretend that it might be. ...Read More

  • John Spence

    Rebalancing Reduces Portfolio Volatility

    by John Spence — Wednesday, May 22, 2002

    Buy low, sell high. It's perhaps the oldest and most familiar of investment axioms. However, investors who neglect to periodically rebalance and let their portfolios run off the leash may not end up living by this ...Read More

  • Feel the Rush of Trading ETFs

    by Richard Evans — Friday, May 17, 2002

    On May 14, when the markets shot up for the second day in a row, did you feel an urge to get in on the action? Yes, I know we all have our standard asset allocation related to our age and so forth. And we're supposed to just let it be. But that's like ...Read More

  • SEC Proposes Mutual Fund Ad Rules

    by Staff — Wednesday, May 15, 2002

    The Securities & Exchange Commission (SEC) is seeking comment on proposed rules designed to ensure mutual fund advertisements aren't misleading to investors. The Commission specifically cited fund ads that touted skyrocketing performance in 1999 and 2000 ...Read More

  • John Spence

    ETFs Defy Traditional Classifications

    by John Spence — Tuesday, May 14, 2002

    Due to their unique structure and operations, exchange-traded funds don't fit neatly into traditional fund classifications. Data providers and industry observers still haven't decided for sure how to pigeonhole ETFs. In particular, several methods can be ...Read More

  • John Spence

    ETF Tax Efficiency Part 2 - In Defense of Index Funds

    by John Spence — Thursday, May 9, 2002

    Yesterday we posted an article on exchange-traded fund (ETF) tax efficiency. We looked at how ETFs function and why proponents claim they will be more tax efficient than traditional index mutual funds over time. We also posted data from ETF researcher ...Read More

  • John Spence

    S&P to Launch Hedge Fund Index

    by John Spence — Wednesday, May 8, 2002

    There seems to be an index for just about anything these days, so why not a benchmark for hedge funds? Standard & Poor's said it is set to launch an index that seeks to tame this unique asset class. The new index will be made up of 40 funds broken into ...Read More

  • John Spence

    ETF Experts Look at Tax Efficiency

    by John Spence — Tuesday, May 7, 2002

    One of the most compelling reasons for investing in exchange-traded funds is their potential heightened tax efficiency relative to traditional index mutual funds. Although most ETFs have a relatively short amount of history behind them, some researchers ...Read More

  • John Spence

    Index Spotlight: Russell Style Indexes

    by John Spence — Monday, May 6, 2002

    Recently we looked at the performance disparity between two small-cap blend indexes: the S&P SmallCap 600 and the Russell 2000. We found that subtleties in index methodology can lead to different results in indexes designed to track similar market ...Read More

  • Capital Asset Pricing Model

    by Frank Armstrong — Wednesday, May 1, 2002

    If Bill Sharpe's first thesis had been accepted, the world of finance might look a lot different today. Fortunately, after the paper was rejected as so uninteresting that there "was absolutely no thesis there," Sharpe was introduced to Harry Markowitz. ...Read More

  • Index Spotlight: Fortune 500

    by Staff — Monday, April 29, 2002

    As passive investing continues to catch on with mainstream investors, understanding the differences between equity indexes is becoming critical for many. Benchmarks that are highly correlated and similar on the surface can oftentimes behave very ...Read More

  • Paul B. Farrell,

    New 12-Step Program for Indexers

    by Paul B. Farrell — Friday, April 26, 2002

    Last Updated: 12:10 AM ET Apr 26, 2002 12-step program for investing in index funds LOS ANGELES (CBS.MW) - I love surfing the web. You go looking for one thing, and you run across a new gem that's so good it makes you forget what you're looking for. Like the "12-Step ...Read More

  • Large Growth Editors' Picks

    by Staff — Wednesday, April 24, 2002's favorites funds and ETFs for the large growth category are as follows. Click on any fund name for more details, the funds are not listed in order of ...Read More

  • Small Growth Editors' Picks

    by Staff — Wednesday, April 24, 2002

    Loved by active managers and shunned by indexers, the small-cap growth sector nonetheless has a handful of excellent index fund ...Read More

  • Small-Cap Value Editors' Picks

    by Staff — Wednesday, April 24, 2002

    Many of the cleverest indexers favor heavy weighting of the small-cap value sector. Our favorites include the following. Click on any fund name for more details, the funds are not listed in order of ...Read More

  • Mid-Cap Value Editors' Picks

    by Staff — Wednesday, April 24, 2002

    Recommended mid-cap value funds mirror their mid-cap growth siblings. Click on any fund name for more details, the funds are not listed in order of ...Read More

  • Large Blend Editors' Picks

    by Staff — Wednesday, April 24, 2002

    For large blend, we suggest the following funds that offer both value and growth. Most are S&P 500 funds. Click on any fund name for more details, the funds are not listed in order of ...Read More

  • Epitaph for a Doomed Fund

    by Staff — Monday, April 22, 2002

    Indexers often talk about "seeding and weeding" of funds in the abstract, which does not always convey the reality of the wreckage created by these practices. Seeding is the frequent launch of new active funds in hopes that a few will shine, and weeding ...Read More

  • Dividends and ETFs

    by Staff — Friday, April 19, 2002

    The structure of an exchange-traded fund can influence its returns, especially when it comes to dividends that companies pass on to shareholders. For example, SPDR 500, by far the largest ETF, is a unit investment trust (UIT). This type of structure ...Read More

  • Select Sector SPDR Changes

    by Staff — Friday, April 19, 2002

    ETF investors should know that a big rebalancing is on the horizon for the Select Sector SPDRs. On June 24 the nine Select Sector SPDRs will rebalance to look more like the ten Global Industry Classification Standard (GICS) sector definitions. GICS is a ...Read More

  • Editors' Picks - US Total Market

    by Staff — Wednesday, April 17, 2002

    We believe it is self-evident that portfolios should start with the domestic total market fund for that portion of the portfolio that is intended to mirror, for the long-term, the total market on a capitalization-weighted basis. We discourage slicing and ...Read More

  • Large Value Editors' Picks

    by Staff — Wednesday, April 17, 2002 preferred large value funds are as follows. Click on any fund name for more details, the funds are not listed in order of ...Read More

  • Editors' Index Fund Picks, by Asset Class

    by Staff — Wednesday, April 17, 2002

    We at feel it is high time we begin to separate the wheat from the chaff. With some firms charging 4% loads and 1% annual fees on S&P 500 index funds, there is a penalty for not choosing ...Read More

  • Small-Cap Blend Editors' Picks

    by Staff — Wednesday, April 17, 2002

    Small-cap blend funds are a favorite way to diversify a portfolio heavy with S&P stocks. Some of our favorites are as follows. Click on any fund name for more details, the funds are not listed in order of ...Read More

  • Mid-Cap Blend Editors' Picks

    by Staff — Wednesday, April 17, 2002's preferred mid-cap blend funds are as follows. Click on any fund name for more details, the funds are not listed in order of ...Read More

  • No Entry or Exit Fees: Another advantage of ETFs

    by Richard Evans — Thursday, April 11, 2002

    Some critics of exchange-traded funds (ETFs) say you can get the same cost and tax advantages by using conventional index funds, especially at Vanguard. Long the king of index funds, Vanguard has about 24 of them, which they manage at extremely low cost. ...Read More

  • John Spence

    UBS Asset Management Licenses Morningstar Indexes

    by John Spence — Thursday, April 11, 2002

    Long known as a sideline mutual fund tracker and commentator, Morningstar is set to enter the industry as an active participant in the role of index licensor. UBS Global Asset Management said today that it will be the first fund company to license at ...Read More

  • New Generation Of Tax Managed Funds

    by Frank Armstrong — Monday, April 8, 2002

    A third generation of tax managed index funds adds dividend management to capital gains management, enhancing the already formidable tax advantages that passive funds offer to investors. These new funds take tax efficiency to a new ...Read More

  • John Spence

    Optimizing Indexed Portfolios

    by John Spence — Thursday, April 4, 2002

    In many cases, holding every stock in an index isn't cost effective. One reason is that some thinly traded securities, such as small-cap or international stocks, are illiquid and carry higher transaction costs and wider bid-ask spreads. Therefore, index ...Read More

  • John Spence

    A Chat with a Socially Responsible Fund Manager

    by John Spence — Thursday, April 4, 2002

    Steve Dillenburg is the lead manager of the Summit Total Social Impact (SATSX) fund, an offering that is truly unique in the socially responsible fund world. The TSI fund invests in all of the stocks in the S&P 500, but it weights the companies ...Read More

  • Another Look at ETF Premium/Discounts and Spreads

    by Staff — Wednesday, April 3, 2002

    As we noted in a previous article, the liquidity of an exchange-traded fund is not always best measured by the historical trading volume of the fund. A better gauge of an ETF's liquidity is the liquidity of the underlying stocks in the index. ...Read More

  • March Wrap-Up

    by Staff — Monday, April 1, 2002

    The S&P 500 inched slightly forward in the first quarter of 2002, while small-cap and value indexes moved ahead of the pack. On the other hand, most growth indexes across market capitalizations are in the red so far this ...Read More

  • The Dimensions of Stock Returns: 2002 Update

    by Truman Clark — Monday, April 1, 2002

    Based on the limited amount of data available, size and value effects also appear in emerging markets. The IFC Investables Total Return Index represents a portfolio of tradable stocks in emerging markets countries that non-resident investors are permitted ...Read More

  • Morningstar Broadens Style Box Methodology

    by Staff — Tuesday, March 26, 2002

    Morningstar, the Chicago-headquartered fund tracker, said it is updating the methodology it uses to pigeonhole mutual funds in its popular style boxes. Like passive index funds, style boxes are a tool long favored by institutional investors that have gone ...Read More

  • John Spence

    Clearing Up an ETF Liquidity Myth

    by John Spence — Wednesday, March 20, 2002

    We thought it was time to put a common misconception on exchange-traded fund liquidity to rest. Some investors appear to believe that the liquidity of an ETF is dependent on the fund's average trading volume, or the number of shares traded per day. ...Read More

  • What Makes A Good Mutual Fund?

    by Frank Armstrong — Monday, March 18, 2002

    As you build your portfolio, once you have decided on your asset allocation between stocks and bonds, and then picked your investment categories within the equity markets, it's time to select the mutual fund for each category. With over 7,000 domestic ...Read More

  • Big Board to Trade ETFs and HOLDRs Under UTP

    by Staff — Wednesday, March 13, 2002

    The New York Stock Exchange said it will soon begin trading 17 HOLDRs and 10 exchange-traded funds on the basis of unlisted trading privileges (UTP). All 27 of these funds are listed on the American Stock Exchange, and the move represents the second time ...Read More

  • Larry Swedroe

    Does Indexing Affect Stock Prices?

    by Larry Swedroe — Tuesday, March 12, 2002

    Index mutual funds have become the villains of an investment soap opera. Active managers have been blaming their underperformance on S&P 500 Index funds. The theory goes like this: money pours into the index funds because of the dissatisfaction with the ...Read More

  • John Spence

    Small Investors Frustrated by AMEX ETF Trading Glitch

    by John Spence — Tuesday, March 12, 2002

    Some individual investors are reporting difficulties purchasing small odd lots of exchange-traded fund shares using limit orders on the American Stock Exchange. Odd-lot limits refer to priced orders for less than the unit of a trade (typically less than ...Read More

  • Ten-Year Risk and Return of Several Popular Indexes

    by Staff — Thursday, March 7, 2002

    Asset allocation is certainly no simple task, but it's a little easier for passive investors as far as choosing funds. The reason is that indexers aren't concerned with finding the best manager in an asset class - they simply invest in the index fund or ...Read More

  • John Spence

    Ten-Year Risk and Return of Equity Asset Classes by Index

    by John Spence — Tuesday, March 5, 2002

    Most of the experts will tell you that a diversified equity portfolio is comprised of funds from the various asset classes, which are separated in terms of size and style. The idea is to build a broad base of funds that will hold up over the long haul and ...Read More

  • Stocks, Bonds and REITs

    by Daniel Fisher — Monday, March 4, 2002

    Investors have been considering real estate as a useful portfolio component for quite a while. Recently I saw the following quote in Roger Gibson's book, Asset Allocation: Balancing Financial Risk: "Let every man divide his money into three parts, and ...Read More

  • April Wrap-Up

    by Staff — Saturday, March 2, 2002

    Here's how major equity indexes fared in April 2002, broken down by index ...Read More

  • February Major Index Returns

    by Staff — Friday, March 1, 2002

    The Dow Jones Industrial Average was in the black for the month of February. Internationally, the Dow Jones indexes that cover world and European markets were down, while Asia closed up in ...Read More

  • John Spence

    Back to Boot Camp: Ben Graham's Take on Mutual Funds

    by John Spence — Thursday, February 28, 2002

    So we've got the whole Enron mess clogging up the headlines. John Bogle says things are so bad that the mutual fund industry, which controls a majority of stock in America's corporations, must break its traditional silence and actively speak out on ...Read More

  • FTSE and HSI Team Up to Launch Asian Equity Indexes

    by Staff — Wednesday, February 27, 2002

    Index providers FTSE and Hang Seng Indexes (HSI) International are getting together to launch a broad index that tracks the Asian economy (minus Japan), as well as sector indexes that cover the area. The new benchmarks will go live ...Read More

  • John Spence

    Morningstar Study Reinforces the Importance of Fund Costs

    by John Spence — Wednesday, February 27, 2002

    Chicago fund-tracker Morningstar wrapped up a study that examines the importance of fund costs on an investor's bottom line. Although the study looked only at actively managed domestic equity funds, the results should provide further encouragement to ...Read More

  • State Street and Unico to Introduce ETFs in Germany

    by Staff — Monday, February 25, 2002

    In a nod to the growing popularity of exchange-traded funds in Europe, Frankfurt-based Unico Asset Management announced that Boston-headquartered indexing behemoth State Street Global Advisors will manage and service seven new Unico i-tracker ETFs. ...Read More