Set of Dice

The Role of Data

Set of Dice

One of the most important aspects of being a genuine fiduciary for clients is to only do with their money that which has been proven to be true. The importance of data obviously ties into fulfilling this part of our fiduciary duty.

At Index Fund Advisors, Inc., we prioritize the use of data in explaining our investment philosophy. Most investors are unaware of the extensive academic literature on the topic of investing. Based on this research, there are certain facts that have been discovered and include the following:

  • Risk and return are tied at the hip You cannot talk about total return without talking about the risk of that return. Risk levels drive return levels.
  • Costs matter Compound interest works wonders when it comes to long term returns, but can also wreak havoc when it comes to long term costs. Investment costs, turnover, commissions, and taxes can all eat away at your overall return.
  • Diversification is essential – global diversification improves returns at any given level of risk.
  • Work with the market instead of trying to beat it Stock picking, market timing, and manager picking has not worked for the vast majority of investors. A much more reliable approach is to buy, hold, and rebalance a globally diversified portfolio of index funds that matches our capacity for risk

With close to 90 years of historical data spanning multiple asset classes around the world, we are not only able to illustrate many different risk and return scenarios over time, but we are also able to estimate proper risk and return expectations for our clients. This is an essential part of the financial planning process.

For more information on how we can help with your personalized late life financial plan, please contact Denise Delaney at 949-428-0457 or [email protected]