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The IRS Addresses Longevity Risk in Retirement Plan Accounts

5,046
by Mark Hebner and IFA Contributors
Friday, July 11, 2014

In our summary of risks facing retirees, we identified longevity (the potential to outlive one’s assets) as one that has increased through time with medical advances leading to ever-longer life-expectancies. One way of mitigating this risk is through the purchase of ...Read More

Archive

  • Active vs. Passive in the U.K.—A Follow-up

    5,424
    by Mark Hebner and IFA Contributors — Thursday, July 10, 2014

    A few weeks ago, we published this article about the dismal performance of active managers in the U.K. We saw that only 1% of them were found to reliably beat a risk-adjusted benchmark, but even for that 1%, ...Read More

  • Transfer on Death and Retirement Account Beneficiaries

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    by Mark Hebner and IFA Contributors — Wednesday, July 2, 2014

    As you are probably aware, if you have an IRA, 401(k), or other type of retirement account, you must have a designated beneficiary(s). Normally, you will have a primary beneficiary as well as a contingent ...Read More

  • The Second Quarter of 2014 in Review

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    by Mark Hebner and IFA Contributors — Tuesday, July 1, 2014

    In the second quarter of 2014, market risk was rewarded around the world, particularly for emerging markets and real estate. Portfolios tilted towards small cap companies were not rewarded to the same extent ...Read More

  • Q&A with IFA: Prediction in Valuations

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    by Mark Hebner and IFA Contributors — Monday, June 30, 2014

    Question: Do valuation measures such as price-to-earnings or price-to-dividend ratios help predict future returns? Are they telling us anything now? Note: The question above was originally addressed in ...Read More

  • Q&A with IFA: Front Running and Fair Pricing

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    by Mark Hebner and IFA Contributors — Monday, June 23, 2014

    Question: What is the relation, if any, between the practice of "front running" trades and the efficient market hypothesis? Note: The question above was taken from DFA’s Fama/French Forum. Here is their ...Read More

  • Passive vs. Active—the View from Across the Pond

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    by Mark Hebner and IFA Contributors — Monday, June 23, 2014

    While perusing the Daily Telegraph, one of our Wealth Advisors came across this article that highlights the bloody awful results delivered by active managers in the U.K. Reporter Richard Evans cites Professor ...Read More

  • Lord Abbett Funds: A Deeper Look at Their Performance

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    by Mark Hebner and IFA Contributors — Friday, June 20, 2014

    On a few occasions, we have been asked by prospective clients about Lord Abbett funds. Like American Funds, they have been around since the Great Depression and are fully dedicated to active management. As of ...Read More

  • Is There a Manager Risk Premium?

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    by IFA Contributors — Friday, June 20, 2014

    A risk premium is the return in excess of a reference rate that an investment is expected to provide. At Index Funds Advisors, Inc., we often speak of three different equity-related risk premiums. First, the ...Read More

  • Tough Times for the Bond King

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    by Mark Hebner and IFA Contributors — Thursday, June 19, 2014

    While patience is a virtue, it appears to be one that is not possessed by many investors in actively managed funds. It is this difficult lesson that PIMCO’s Bill Gross aka “The Bond King” has ...Read More

  • FINRA Calls Out Merrill Lynch

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    by Mark Hebner and IFA Contributors — Thursday, June 19, 2014

    When reviewing retirement plans for our clients or for retirement plan sponsor clients, we often see the presence of mutual funds with front-end loads (Class A shares). However, we have always made the ...Read More

  • The Never-Ending Pursuit of Manager Alpha – Updated

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    by Mark Hebner and IFA Contributors — Wednesday, June 18, 2014

    As we have pointed out on many occasions, both stock picking and hiring an active manager to pick stocks on your behalf are mug’s games. While some investors diligently study individual stocks and other ...Read More

  • Passive vs. Active: Yet another Milestone Is Reached

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    by Mark Hebner and IFA Contributors — Monday, June 16, 2014

    According to this Bloomberg article, Vanguard just passed up Fidelity to become the number one provider of 401(k) assets, thus continuing the long-term trend of migration from passive to active that we have ...Read More

  • The NACUBO Study

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    by Mark Hebner — Thursday, June 12, 2014

    You may think that college endowments, with all their access to academic knowledge and brainpower, would regularly hit home runs. You would be ...Read More

  • A Graphical View of the Mutual Fund Landscape

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    by Mark Hebner and IFA Contributors — Wednesday, June 11, 2014

    Since IFA began operations in 1999, we have published articles detailing how incredibly stacked the odds are against successfully picking a manager who will beat his benchmark (i.e., deliver alpha). See here ...Read More

  • Q&A with IFA: Dividends—Is Bigger Better?

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    by Mark Hebner and IFA Contributors — Friday, June 6, 2014

    Question: Does an equity strategy focusing on stocks with above-average dividend yield offer an appealing risk/reward tradeoff? Have dividend-paying stocks outperformed non-dividend payers in the U.S.? Note: ...Read More

  • Q&A with IFA: Cap Weighting or GDP Weighting

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    by Mark Hebner and IFA Contributors — Wednesday, June 4, 2014

    Question: What is the merit, if any, in using a country weighting scheme based on Gross Domestic Product (GDP) rather than market capitalization? Note: The question above was taken from DFA’s Fama/French ...Read More

  • Q&A with IFA: Seeking the Inefficient Asset Class

    4,888
    by Mark Hebner and IFA Contributors — Tuesday, June 3, 2014

    Question: We often hear the claim that some markets are less efficient than others—small company stocks, emerging markets, foreign exchange, and so on. Is there any evidence to support this assertion? ...Read More

  • Fairholme and Sequoia—No Great Performance Here

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    by Mark Hebner and IFA Contributors — Thursday, May 15, 2014

    Recently, we received a question from a client that we will paraphrase as follows: “While I know that the returns I have gotten from index funds have beaten the majority of active managers, would I not ...Read More

  • When Reality Confronts Investor Expectations

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    by Mark Hebner and IFA Contributors — Wednesday, May 14, 2014

    A recent survey of 1,050 American investors conducted by Natixis Global Asset Management found that they said they needed average annual returns of 9.8% above inflation to meet their financial needs such as ...Read More

  • The American Enterprise Institute Honors Eugene Fama

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    by Mark Hebner and IFA Contributors — Monday, May 12, 2014

    The American Enterprise Institute for Public Policy Research (AEI) is a private not-for-profit think tank whose stated mission is "to defend the principles and improve the institutions of American freedom ...Read More

  • Do Active Investors Have a Gambling Problem?

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    by Mark Hebner and IFA Contributors — Wednesday, May 7, 2014

    Index Fund Advisors’ 12-Step Program for Active Investors suggests that active investing is a disease akin to alcoholism, drug addiction, or gambling addiction. While we certainly do not say that all ...Read More

  • IFA's Scientific Approach to Investing

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    by Mark Hebner and IFA Contributors — Tuesday, May 6, 2014

    Since its inception, Index Fund Advisors has always strived to take a scientific or academic approach to investing. We follow the evidence (i.e., long-term returns data) to wherever it leads us and we live by ...Read More

  • Manager Picking is a Mug's Game

    7,920
    by Mark Hebner and IFA Contributors — Friday, May 2, 2014

    The search for investment managers who will deliver alpha is an activity that accounts for billions of dollars that is spent by foundations, endowments, pension plans, and other institutional investors. To ...Read More

  • Small-Cap Face-Off: Russell 2000 vs. S&P 600

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    by Mark Hebner and IFA Contributors — Thursday, May 1, 2014

    Investors who decide to index the small-cap portion of their portfolios face a bewildering array of choices from index mutual funds and exchange-traded funds (ETFs) that track indexes from providers such as ...Read More

  • Capturing the Momentum Factor—Simple but Not Easy

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    by Mark Hebner and IFA Contributors — Tuesday, April 22, 2014

    Last year, we wrote this article about momentum, which as the name suggests, is the tendency of securities that have outperformed (or underperformed) the market over a three- to twelve-month period to continue ...Read More

  • When a Negative Is Actually a Positive

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    by Mark Hebner and IFA Contributors — Monday, April 21, 2014

    Last week, BlackRock Inc, the world’s largest money manager released its quarterly earnings report for the first quarter of 2014. Normally, we don’t pay much attention to these things, but ...Read More

  • Connecting the Dots

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    by Jim Parker, Dimensional Fund Advisors — Thursday, April 17, 2014

    Human beings love stories. But this innate tendency can lead us to imagine connections between events where none really exist. For financial journalists, this is a virtual job requirement. For investors, it ...Read More

  • The Problem of High 401(k) Costs

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    by Mark Hebner — Monday, April 14, 2014

    In December of 2012, Demos, a liberal think tank, published The Retirement Savings Drain—The Hidden and Excessive Costs of 401(k)s. It caused quite a stir and provided much of the source material for the ...Read More

  • When Mythology Is Confused with Reality

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    by Mark Hebner and IFA Contributors — Friday, April 11, 2014

    In the investment industry, the term “white paper” carries a lot of currency. As for what distinguishes an ordinary article from a full-fledged white paper, it is usually just a matter of length or ...Read More

  • Morningstar Takes a Closer Look at Survivorship Bias

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    by Mark Hebner and IFA Contributors — Wednesday, April 9, 2014

    One of the problems with commonly cited mutual fund returns data is that it ignores the issue of survivorship bias, the tendency for mutual funds with poor performance to be merged into other funds or shut ...Read More

  • Seven Ways to Fool Yourself

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    by Jim Parker — Tuesday, April 8, 2014

    The philosopher Ludwig Wittgenstein once said that nothing is as difficult for people as not deceiving themselves. But while most self-delusions are relatively costless, those relating to investment can come ...Read More

  • The First Quarter of 2014 in Review

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    by Mark Hebner and IFA Contributors — Friday, April 4, 2014

    In the first quarter of 2014, risk was rewarded, but not to the extent to which we may have become accustomed to in 2013. With the exception of emerging markets and emerging markets value, all of the specific ...Read More

  • The 4% Retirement Spending Rule: Is It Still Relevant?

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    by Mark Hebner and IFA Contributors — Monday, March 31, 2014

    The 4% retirement spending rule was developed 20 years ago by William P. Bengen, a financial planner who published his results in the Journal of Financial Planning. Essentially, the 4% rule says that retirees ...Read More

  • International Diversification vs. Home Bias

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    by Mark Hebner and IFA Contributors — Tuesday, March 25, 2014

    In a recent article on the concept of advisor's alpha, Vanguard emphasized the importance of advisor’s putting their clients into portfolios that they are unlikely to trade under varying market ...Read More

  • Confessions of an Active Manager

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    by Mark Hebner and IFA Contributors — Monday, March 24, 2014

    Recently, one of our fans in India sent us a fascinating article by his fellow countryman, Mehrab Irani who has had the responsibility of managing active mutual funds for a large fund family. As we have noted ...Read More

  • How Smart is Your Beta?

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    by Mark Hebner and IFA Contributors — Sunday, March 23, 2014

    At Index Fund Advisors, we are always keeping an ear out for new terminology that appears in the investment marketplace. Recently, there has been a lot of talk about “smart beta”. Recall that beta, ...Read More

  • A New Low for CNBC

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    by IFA Contributors — Friday, March 21, 2014

    With nothing better to do the other night, I decided to try out CNBC’s new series, Money Talks, a reality show that follows the antics of one Steve Stevens and his company VIP Sports of Las Vegas which ...Read More

  • Consumer Price Index and Consumption

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    by Mark Hebner and IFA Contributors — Tuesday, March 18, 2014

    Economists discuss the choices people make with their income as some allocation of consumption and savings. They remind us that we apply our human capital (our skills and time) to earn financial capital (our ...Read More

  • The Continuing Wisdom of the Oracle of Omaha

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    by Mark Hebner and IFA Contributors — Monday, March 17, 2014

    “Games are won by players who focus on the playing field -- not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on ...Read More

  • Capturing Portfolio Returns: Simple but not Easy

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    by Mark Hebner and IFA Contributors — Friday, March 14, 2014

    Throughout the IFA Website, you will find long-term historical returns of the IFA Index Portfolios and the asset classes that make up those portfolios. One example is the table of Simulated Passive Investor ...Read More

  • Pension-Gate Continues: North Carolina is on Notice

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    by Mark Hebner and IFA Contributors — Thursday, March 13, 2014

    Those of you who are long-time followers of ifa.com are probably aware of the attention we have given to the very large problem of mismanagement of public pension plan funds. Thanks to diligent research that ...Read More

  • The Big Tease Continues

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    by Mark Hebner and IFA Contributors — Tuesday, March 11, 2014

    Take a walk past the financial section of your local newsstand, and you are likely to be greeted with headlines like “Ten Hot Stock Picks for 2014!” or “The Top Ten Mutual Funds to Buy ...Read More

  • A Brief History of the Efficient Markets Hypothesis

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    by Mark Hebner and IFA Contributors — Monday, March 10, 2014

    In 2008, Nobel laureate Eugene Fama delivered a brief lecture to the American Finance Association. The entire 30-minute video is included above, and it is well worth an investment of your time. Fama was ...Read More

  • When It Pays to Be Patient

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    by Mark Hebner and IFA Contributors — Tuesday, February 25, 2014

    One of the reasons that Index Fund Advisors advises the use of Dimensional funds is their patient and opportunistic approach to trading which differentiates them from traditional index fund providers. All too ...Read More