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Cast in Iron

7,387
by Jim Parker
Monday, April 20, 2015

The media occasionally locks in on a particular “hot” sector. In the late 1990s, it was technology. In the mid-2000s, it was mining. Writing headlines about fashionable sectors is one thing. Building investment strategies around them is another. A reason ...Read More

Article Library

  • The First Quarter of 2015 in Review

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    by Tom Allen and Mark Hebner — Thursday, April 16, 2015

    2015 has been a hallmark year for diversification so far. In Q1 we saw international developed and emerging markets outpace their domestic counterparts. During the quarter, the European Central Bank announced its own “quantitative easing” program, aiming at buying ...Read More

  • Wall Street Wipe Out – New York's Pension Plan Hit Hard with Fees

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    by Tom Allen and Mark Hebner — Wednesday, April 15, 2015

    An article recently published in the New York Times highlighted the impact that fees had on the gains made by the New York City Pension Funds. An internal analysis conducted by the Comptroller of New York City, Scott M. Stringer, concluded that $2 Billion in fees have been ...Read More

  • Keys to the Investment Vault: The Case for Index Funds

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    by Larry Weber — Tuesday, March 31, 2015

    Investing is not as complicated as portrayed by Wall Street types or the press. Most people can learn the basic best practice strategies of investing and asset allocation in a matter of days through a good investment education program led by an investment advisor who serves as a ...Read More

  • Key Man Risk: Yet Another Reason to Avoid Active Funds

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    by Mark Hebner and IFA Contributors — Monday, March 30, 2015

    When discussing the risks of investing in actively managed funds, we have focused on issues related to timing and selection.  Recently, we had a chance to view a report from a prominent investment consultant that was prepared for a major institutional client in our very own ...Read More

  • The Power of Market Returns

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    by Mark Hebner and IFA Contributors — Thursday, March 26, 2015

    “Compound interest is the most powerful force in the universe.”    - Albert Einstein While perusing the Wall Street Journal, we came across this delightful article about a retired janitor (Ronald Read) in Brattleboro, Vermont who passed away at the age ...Read More

  • 12b-1 Fees/Revenue Sharing Come Under Increased Scrutiny

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    by Mark Hebner and IFA Contributors — Wednesday, March 25, 2015

    In the wake of a recent Presidential announcement, mutual fund 12b-1 fees/revenue sharing known as “backdoor payments” as the White House calls them, are under investigation by the Securities and Exchange Commissions (SEC) and the Department of Labor (DOL). ...Read More

  • Did Bloomberg Find Another Bill Miller?

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    by Mark Hebner and IFA Contributors — Tuesday, March 24, 2015

    You may recall that Bill Miller was the fund manager who enjoyed the unparalleled winning streak of beating the S&P 500 Index for fifteen consecutive years ending in 2005. Of course, investors who came late to this party severely regretted it as Miller’s ...Read More

  • Book Review: The Great Beanie Baby Bubble

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    by Thomas Brunson — Monday, March 23, 2015

    “It had gone from cute to heinous, and there was no good way for it to end”- Zac Bissonnette, New York Times bestselling author  At the height of the late 1990’s tech bubble, speculative mania also fueled a nationwide obsession in a cute-and-cuddly little ...Read More

  • Yet Another Sign that the Tipping Point Has Arrived

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    by Mark Hebner and IFA Contributors — Friday, March 20, 2015

    We have spoken several times (see here and here) about the tipping point in the long-term migration from active to passive management. While perusing InvestmentNews, we encountered this article about investors shunning stock pickers in favor of index funds which have been ...Read More

  • Vanguard Wades Deeper into Alternative Investments

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    by Mark Hebner and IFA Contributors — Thursday, March 19, 2015

    If you find the above title puzzling, then you may not be aware that Vanguard offers a market neutral fund (VMNFX) that engages in a long/short equity strategy. Among all the Vanguard funds, it has far and away the highest expense ratio at 1.60%. Setting the minimum investment ...Read More

  • Fiduciary—Why Your Retirement Depends on this Word

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    by Larry Weber — Wednesday, March 18, 2015

    The Webster’s dictionary of 1913 tells us that a fiduciary is someone “who holds a thing in trust for another, a trustee.” A fiduciary involves confidence or trust; confident; undoubting; faithful; firm; as in a fiduciary capacity. The definition still holds ...Read More

  • One More Nail in the Coffin of Active Management

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    by Mark Hebner and IFA Contributors — Tuesday, March 17, 2015

    “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.”               ...Read More

  • Addressing Some Misconceptions about Indexing

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    by Mark Hebner and IFA Contributors — Wednesday, March 11, 2015

    While Forbes magazine has often carried excellent articles about investing such as this one, we found a recent column from Pamela Rosenau to be disappointing. She begins by noting the mass migration from active management to passive and quotes Jack Bogle who said, “About ...Read More

  • Mark Hebner and IFA Contributors

    Pension-Gate — More Good News from Pennsylvania

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    by Mark Hebner and IFA Contributors — Tuesday, March 10, 2015

    A little more than a year ago, we reported on how the stewards of the pension fund for Montgomery County, Pennsylvania came to the wise decision of moving away from high-cost actively managed funds in favor of low-cost index funds from Vanguard, whose founder Jack Bogle played a ...Read More

  • Book Analysis: The Panic of 1837

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    by Thomas Brunson — Monday, March 9, 2015

    “Over-trading, speculation, and investments in unproductive undertakings became a dominant note in American society”- Reginald Charles McGrane In his historical novel titled The Panic of 1837, former University of Cincinnati history professor Reginald Charles McGrane ...Read More

  • Yet More Wisdom from the Oracle of Omaha

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    by Mark Hebner and IFA Contributors — Friday, March 6, 2015

    One of the things we look forward to at this time of year is the release of Warren Buffett’s annual letter to the shareholders of Berkshire Hathaway, and his 2014 letter (which marks the 50th anniversary of the leadership of Warren Buffett and Charlie Munger) did not ...Read More

  • Weather vs. Climate

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    by Jim Parker — Thursday, March 5, 2015

    Notice how TV news bulletins put finance next to the weather report? In each, talking heads point at charts and intone about intraday events that are quickly forgotten. Meanwhile, the long-term wealth building story gets overlooked. Many investors feel that they are not properly ...Read More

  • Is Skill Dead? Perhaps It Was Never Alive

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    by Mark Hebner and IFA Contributors — Wednesday, March 4, 2015

    A recently released white paper from GMO titled “Is Skill Dead?” begins with this excellent quote from Jeremy Grantham: “90% of what passes for brilliance or incompetence in investing is the ebb and flow of investment style.” Our only argument with that ...Read More

  • The Emotional Investor: An Interesting New Website

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    by Mark Hebner and IFA Contributors — Tuesday, March 3, 2015

    Recently, we came across theemotionalinvestor.org which is run by Jay Mooreland who, like Joshua Brown, can be described as a reformed broker. As a holder of the Certified Financial Planner (CFP) designation and a Master’s Degree in Applied Economics, Mr. Mooreland now ...Read More

  • Q&A with IFA: Momentum at the Asset Class Level

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    by Mark Hebner and IFA Contributors — Monday, March 2, 2015

    Question: I understand that there is evidence that momentum is one contributing factor to long term performance (in addition to the size and value factors). There is a current advisory service (Fundx) that purports to capture the momentum factor and improve long term performance ...Read More

  • A Presidential Announcement that Should Give Brokers Pause

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    by Mark Hebner and IFA Contributors — Thursday, February 26, 2015

    A few weeks ago, we published this article about a White House memo in which the Chairman of the Council of Economic Advisers (Jason Furman) recommended that brokers who service retirement accounts be legally required to apply a fiduciary standard of care. On Monday (2/23/2015), ...Read More

  • Why Does This Machine Simulate Monthly Market Returns?

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    by Mark Hebner and IFA Contributors — Wednesday, February 25, 2015

    Anyone who has visited IFA’s office in Irvine will likely have a fond memory of Francis, IFA’s probability machine, named after Francis Galton, an English mathematician who was an expert in many scientific fields. For those needing a refresher or a first ...Read More

  • More Bad News on the State of Retirement Readiness

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    by Mark Hebner and IFA Contributors — Tuesday, February 24, 2015

    A few months ago, we published this article addressing the woefully inadequate level of American financial literacy as it relates to retirement saving and investing. This newly released issue brief from EBRI (Employee Benefit Research Institute) highlights the consequences that ...Read More

  • Book Analysis: The Stock Market Crash of 1929

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    by Thomas Brunson — Monday, February 23, 2015

    “The crash of 1929 stands out in financial history like a lighted beacon on a hilltop warning of impending trouble”-David V. Axon   In Gordon V. Axon’s book titled The Stock Market Crash of 1929, he recounts the historical and economic factors behind the ...Read More

  • It's Tax Planning Time For Trusts

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    by Randy Gardner and Leslie Daff — Friday, February 20, 2015

    The 39.6% ordinary tax rate and 20% capital gain tax rate enacted by the American Taxpayer Relief Act of 2012 (ATRA) and the 3.8% Medicare investment surtax now apply when trust income exceeds $11,950.  These high rates apply at much lower levels of income for trusts than ...Read More

  • Should Hedge Funds Get Away With It? Not on Our Watch!

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    by Mark Hebner and IFA Contributors — Thursday, February 19, 2015

    The title above is a play on the title of this excellent article from the venerable New Yorker magazine which offers eight possible explanations for what Barry Ritholtz brilliantly calls The Most Fascinating Investing Paradox—that qualified investors keep pouring money ...Read More

  • Cramer Weighs in on Mutual Funds

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    by Mark Hebner and IFA Contributors — Wednesday, February 18, 2015

    As you may have guessed or perhaps already have known from articles such as this one or this one, we at Index Fund Advisors, Inc. are not fans of CNBC’s Jim Cramer. While some may claim that he has helped to educate his viewers who would otherwise know next ...Read More

  • About Those Bulls and Bears

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    by Mark Hebner and IFA Contributors — Tuesday, February 17, 2015

    In the IFA Library of rare and antique finance-related books, we recently acquired a first edition from 1838 of Sketches of Imposture, Deception and Credulity. Although the author is officially anonymous, he was identified by Christopher Dennistoun as Richard Alfred Davenport. ...Read More

  • Tips for Protecting Your Online Brokerage Accounts from Fraud

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    by Mark Hebner and IFA Contributors — Friday, February 13, 2015

    We recently came across this Investor Bulletin from the U.S. Securities and Exchange Commission that provides valuable information to investors who are looking to minimize the chances of having their accounts hacked. We have summarized the most important tips below. Pick a ...Read More

  • Are Stock Pickers Getting Desperate?

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    by Mark Hebner and IFA Contributors — Wednesday, February 11, 2015

    We ask this question after reading this interesting article by David Randall from the Daily Mail. We believe the author was being polite in his word choice of “creative” rather than “desperate?” In prior articles such as this one, we have noted how 2014 ...Read More

  • Book Analysis: Risk and Return: Or How to Live with Wall Street

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    by Thomas Brunson — Tuesday, February 10, 2015

    “To some men speculation means a way to accumulate money without menial or physical labor- to the inexperienced only!” In Robert Lee Sharp and Wallace H. Matlock’s succinctly sarcastic 1951 book titled Risk and Return: Or How to Live with Wall Street, they both ...Read More

  • The Analysts Underestimate Apple Again

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    by Mark Hebner and IFA Contributors — Monday, February 9, 2015

    On 1/27/2015, Apple released a spectacular earnings report for the first quarter of its 2015 fiscal year. Once again, it smashed through the analysts’ predictions, earning $3.06 per share vs. a consensus estimate of $2.60. Powered by the newly introduced iPhone 6 and 6 ...Read More

  • IFA FinPlan: Adjusting the Privacy and Alerts Settings

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    by Mark Hebner — Friday, February 6, 2015

    To get the most out of IFA FinPlan, we suggest taking a few minutes to adjust your privacy and alerts settings. This process is initiated by clicking on the “settings” link in the upper-right-hand corner of the IFA FinPlan home screen. The “Privacy” tab ...Read More

  • IFA FinPlan: Using the Vault Feature [VIDEO]

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    by Mark Hebner — Thursday, February 5, 2015

    Clients who have signed up for IFA FinPlan have the ability to securely store an unlimited number of files. In this article, we will discuss some of the files that you may want to upload to your vault. Please note that an iOS-enabled device may be used for this ...Read More

  • Some Sage Advice from the Guardian

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    by Mark Hebner and IFA Contributors — Monday, February 2, 2015

    The title of this Guardian article by Kira Brecht (“How Highly Paid Wall Street Guys Could Be a Threat to Your Retirement Money”) perfectly summarizes the situation of today’s individual investors. Brecht begins with the decision of Washington DC entrepreneur ...Read More

  • A Memo that Should Give Brokers Pause

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    by Mark Hebner and IFA Contributors — Friday, January 30, 2015

    Recently, a White House memo dated 1/13/2015 from the Chairman of the Council of Economic Advisers (Jason Furman) came to our attention. Co-authored with fellow Council member Betsey Stevenson, it calls out abusive trading practices that cost retirement savers billions of ...Read More

  • Book Analysis: The Story of a Speculator

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    by Thomas Brunson — Thursday, January 29, 2015

    “Why, if a speculator won every time, soon he would own everything in the world” -Arthur W. Cutten, veteran wheat pit trader In his autobiographical narrative titled the Story of a Speculator, the famous commodity trader Arthur W. Cutten (1870-1936) recollects his ...Read More

  • Understanding Administrative Trustee Services

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    by Mark Hebner and IFA Contributors — Wednesday, January 28, 2015

    If you have a trust, you are probably familiar with the idea of trustee (which could be yourself) who oversees the administration of the trust and has a fiduciary duty to act in the best interests of the beneficiary(s) of the trust. However, you may not be aware that ...Read More

  • Mark Hebner and IFA Contributors

    Is a Donor Advised Fund Right for You?

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    by Mark Hebner and IFA Contributors — Tuesday, January 27, 2015

    A donor advised fund (DAF) is a charitable giving vehicle administered by a public charity created to manage charitable contributions on behalf of organizations, families, or individuals. The giver opens an account in the fund which can be held at a major brokerage firm such as ...Read More

  • Q&A with IFA: Equally-Weighted S&P 500 Index

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    by Mark Hebner and IFA Contributors — Monday, January 26, 2015

    Question: I have heard that an equally-weighted version (as opposed to the standard market cap-weighted version) of the S&P 500 Index achieves a higher return without additional risk. Should I not use this for the U.S. large cap component of my portfolio? Our data on the ...Read More

  • A Look Back at Some Good Articles from 2014

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    by Mark Hebner and IFA Contributors — Friday, January 23, 2015

    At Index Fund Advisors, we consider 2014 to have been a tipping point year in the migration from active to passive management. Here are some of the articles that helped to convince us of this idea. Please enjoy. Will Invest for Food (The Economist, 5/3/2014) This insightful ...Read More

  • Another View of Smart Beta

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    by Mark Hebner and IFA Contributors — Thursday, January 22, 2015

    As we have stated in prior articles such as this one, smart beta is primarily a marketing term that refers to the attempt to capture risk and return factors beyond beta (overall exposure to the market). The best known examples are fundamentally-weighted index funds which also ...Read More

  • Mark Hebner and IFA Contributors

    It's Now Official: Invest and Relax

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    by Mark Hebner and IFA Contributors — Wednesday, January 21, 2015

    As we say in Step 12 of IFA’s 12-Step Recovery Program for Active Investors, “Invest and Relax.” We just received confirmation of our advice from Assistant Professor Michaela Pagel of Columbia Business School who posted this working paper which is nicely ...Read More

  • The Paper that Formalized the Size Premium

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    by Mark Hebner and IFA Contributors — Friday, January 16, 2015

    At Index Fund Advisors, we implement portfolios for our clients that are tilted towards the compensated risk and return factors of small cap, value, and profitability. In this article, we will review the paper1 published in 1981 that formally identified the size premium, The ...Read More

  • Mark Hebner and IFA Contributors

    The Small Cap Tilt: Is It Still a Reliable Source of Higher Returns?

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    by Mark Hebner and IFA Contributors — Thursday, January 15, 2015

    There is no arguing the fact that 2014 has been a difficult year for small cap stocks around the world (with the exception of emerging markets) and particularly in the U.S., as shown in the table below: For the U.S., 2014 has been the worst year for small cap ...Read More

  • 2014: Patience Pays Off

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    by Weston Wellington — Wednesday, January 14, 2015

    Forecasters often cite a figure of 8%–10% as a likely outcome for stock market performance in the year ahead, and 2014 was no exception. As sensible as this may sound, it is worth pointing out that over the past 89 years, the S&P 500 Index and its predecessors have ...Read More

  • Let the Compounding Effect Work for You

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    by Venkat Yarlagadda — Wednesday, January 14, 2015

    “Compound interest is the eighth wonder of the world. He who understands it, earns it…he who doesn’t…pays it.”  – Albert Einstein “Someone is sitting in the shade today because someone planted a tree a long time ago.” ...Read More

  • The Sharks Are Biting: Wall Street's Structured Products

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    by Mark Hebner and IFA Contributors — Wednesday, January 14, 2015

    “Wall Street is a place where anything that can be sold will be sold”  – Warren Buffett “You are just a buyer of Wall Street’s dreck” – Robert Soros “They [structured products] are horrible investments for retail ...Read More

  • When the Law Takes a Dim View of Cherry-Picking

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    by Mark Hebner and IFA Contributors — Tuesday, January 13, 2015

    As the Securities and Exchange Commission admonishes newly-registered investment advisers on its Website, “As an investment adviser, you are a ‘fiduciary’ to your advisory clients. This means that you have a fundamental obligation to act in the best interests ...Read More

  • FINRA Promises 2015 Will Be a Year of Scrutiny for Brokerage Firms

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    by Mark Hebner and IFA Contributors — Monday, January 12, 2015

    A few days ago, the Financial Industry Regulatory Authority (FINRA) released its 2015 Regulatory and Examination Priorities letter highlighting significant risks and issues that, if not properly addressed, could affect investors and market integrity. Although it comes in a bit ...Read More

  • IFA Index Portfolio 100 vs. the S&P 500 Index [VIDEO]

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    by Mark Hebner and IFA Contributors — Thursday, January 8, 2015

    There is no arguing the fact that compared to U.S. large company stocks, 2014 was a difficult year globally diversified portfolios tilted towards small cap and value stocks. The table below shows the 2014 difference between IFA Index Portfolio 100 (which is the equity component ...Read More

  • What Should Investors Do Now? [VIDEO]

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    by Venkat Yarlagadda — Thursday, January 8, 2015

    Here is a classic video by Weston Wellington at DFA. During the 2008 market downturn some investors may have questioned the wisdom of their investment strategy. Weston address a number of questions and concerns from clients regarding business conditions, the capital markets, ...Read More

  • Book Review: Commanding Heights

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    by Thomas Brunson — Tuesday, January 6, 2015

    There’s little more frustrating than being stuck in a traffic jam, especially when you’re trying to get somewhere important. The same can be said for the way developing and third-world countries anxiously awaited what a changing world economy had in store for their ...Read More