IFA's Quote of the Week - 51 (Mark Hebner)


Step 12 - Invest and Relax

"Important services such as rebalancing, tax managed investments and tax loss harvesting help investors maximize returns at a given level of risk."

-Mark Hebner, IFA President, March 27, 2009








A Special Message From Mark Hebner

Dear Friends of IFA,

On March 5th 2009, Index Funds Advisors celebrated its 10th anniversary.

I am pleased to thank all of you who have helped make such a milestone both imaginable and possible.

I am especially grateful to our more than 3,000 clients have put their trust in IFA. You are a testament to the importance of education for long-term investing success.

In 1999, I embarked on a mission to change the way the world invests. I did so because I had learned the hard way that stock market speculation is both widespread and destructive.

Through extensive study and research, I found a smarter way to invest—a strategy based on rigorous academic discoveries and decades of data--and I wanted the entire world to share in what I learned.

I set out to replace speculation with science—to provide the meaningful data that would allow investors to make informed decisions about their hard-earned dollars. Decisions that were based on probability, not personality and about accepting uncertainty, not betting on it.

Back then, I knew the Internet was the only way to display the abundance of information that I had discovered, developed and assembled—the kind of information that would empower investors to let go of their need to predict the markets in favor of just buying and holding the markets—in risk-appropriate doses.

As you may know, my website is an open book — quite literally! It contains a web version of my own book: Index Funds: The 12-Step Program for Active Investors. It also contains hundreds of studies, charts, articles, podcasts and instructional videos, along with exclusive video interviews with some of the most distinguished financial experts, including Eugene Fama Jr. and Nobel Prize Winner Harry Markowitz, who serves as an academic consultant to IFA. This abundance of unbiased information is the anecdote for investor confusion that leads to misplaced trust and poor decisions. As Warren Buffett recently said, “If you are confused and fearful, you don’t get over being fearful until you aren’t confused.”  

Perhaps most important to you is the Risk Capacity survey that you can take in 5 to 10 minutes--right on the website. In almost an instant, you will receive an asset allocation that matches your investment profile based on the answers you provide. It couldn’t be easier for you to get started on your path to risk-appropriate investing.

Like most financial advisors, we at IFA are asked constantly about our views on where the markets are going in the next several months. Unlike most financial advisors, our response is: “We don’t know.”

We don’t pick stocks or time markets at IFA. Instead, we rely on 81 years of risk and return data and on rolling period analysis that empowers us to help you make the best decision for you and your long-term situation—not what the market might do in the next 6 weeks or six months. If your time horizon is that short, you should avoid equities altogether. As Ben Graham, Warren Buffett’s mentor, so aptly pointed out, “In the short term, the market is a voting machine, but in the long term, it is a weighing machine.” 

At IFA, we follow a blueprint that is driven by your Risk Capacity — the measure of how much risk is right for YOU -- not your friend, not your boss and not your in-laws.

That blueprint is called an Investment Policy Statement or IPS and it gives us the discipline to remain committed to a strategy that is supported by 81 years of risk and return data.

A properly constructed IPS enables us to follow a well-conceived, long-term investment strategy. Without the IPS, individuals can easily fall prey to fear or emotion, making decisions on an individual event-driven basis. This behavior most often leads to chasing short-term results and cuts off investors from the opportunity to achieve long-term market rates of returns — the returns they have the right to earn if they would simply get on the right investing track and stay there, especially during the extreme fluctuations in stock market returns like those we have seen recently.

History provides compelling data that broad market indexes reward investors over time with about a 9% average annualized return. Risk-appropriate tilts to small and value markets have shown to deliver additional returns to those whose time horizon permits these specific risk exposures. Important services such as rebalancing, tax managed investments and tax loss harvesting help IFA clients maximize their returns at a given level of risk.

It has been a wonderful decade for IFA, and first and foremost, we have our clients to thank. As a fee-only financial advisor, my team and I are here today because we have their trust — and we value that trust immensely.  

We also extend our gratitude to the million or more visitors who have quenched their thirst for unbiased investing knowledge — and who also know that I seldom meet a chart I don’t like; and to the many, many more who have learned about bell-shaped curves, rolling period returns and the magnitude of personal and financial satisfaction that comes from abandoning the prediction addiction in favor of unbiased research and history. 

No grass is growing under our feet as IFA’s second decade is off to a very busy start. Soon, we will be occupying our new state of the art headquarters in Irvine, California. This new first floor facility in our same building gives us the latitude to expand into new information delivery systems like seminars and investing classes that will provide a personalized dimension to the IFA investor experience. Offices and regional representatives in Wisconsin, Florida, Pasadena, Westlake Village and New York further enable IFA to expand its foothold throughout the country. Whether in person, or at, we encourage you to visit us and often.

Once again thank you for a wonderful first decade and stay tuned as ifa continues to advance its mission to change the way the world invests.

Mark Hebner

Mark Hebner Sig
Index Funds Advisors