Index Funds.com is a comprehensive
independent resource on index funds investing, promoting
a commonsense approach that seeks to maximize expected returns
at each level of risk, utilizing index portfolios.
An index fund can be defined as a mutual fund or exchange
traded fund (ETF) with clearly defined rules of ownership, that
are held constant regardless of market conditions. The
fund does not have to follow a well known index.
There are about 1,000 index funds in the Morningstar database as
of Dec., 2006, leaving investors with a new questions about their
portfolios. What allocation of passive investments (index funds)
best matches my risk
capacity?
An extensive database of index funds articles and data can be
found on this site. Including information on Dimensional Fund
Advisors (DFA), Vanguard, Barclays Global, and most other index
funds.
April 25, 2009 - - IFA leverages CROWDSOURCING by
accepting stock prices agreed to by millions of traders. This
is also referred to as Wisdom
of the Crowds.
"Professor Wermers said he believed that
it was “exceedingly probable that any fund that has
beaten the market by an average of more than one percentage
point per year over the last decade achieved that return
almost entirely due to luck alone. By definition, therefore,
such a fund could not have been identified in advance,” he
added.
The investment implication is clear, according to Mr. Kritzman. “It
is very hard, if not impossible,” he wrote in his study, “to
justify active management for most individual, taxable investors,
if their goal is to grow wealth.” And he said that those
who still insist on an actively managed fund are almost certainly “deluding
themselves.” nyt.com
Want
to learn about investing?
R E A D - A - B O O K !
Three
Great Books on Index Funds:
Are
Active Managers Skillful or Lucky?
Bill
Miller Gives His Two Cents on Index Funds
In an interview with Money Magazine for its July
2007 issue, Bill Miller, manager of the Legg Mason Value
Trust Fund describes his improbable 15-year streak of outperforming
the S&P 500. Miller’s incredible run has many industry
insiders and investors scratching their heads in bemusement
as to whether his success is attributed to pure luck, calculated
skill, or even poor benchmarking (Legg
Mason’s Value Trust Fund had risk levels (standard
deviation) of a value index, but was compared against the
S&P 500).
While Miller credits his own past success in the active management
arena to a “modicum of skill,” he himself recommends
that investors buy index funds. Specifically, Miller told Money that
a “significant portion of one’s assets in equities” should
be comprised of index funds. “Unless you are lucky, or
extremely skillful in the selection of managers, you’re
going to have a much better experience going with the index
fund,”...[Click
Here to Read More]
For independent investment advice on ETFs and
index funds and access to DFA's highly optimized institutional-style
index funds, call Index Funds Advisors toll free: 888-643-3133
or visit ifa.com.
IFA accepts no fees from investment products they recommend.
IFA advisory fees are for their independent advice, and not product-related
in anyway. Be cautious of the high cost of low cost advisors,
see cheapadvisor.com.
"Markets work because capital
flows to its efficient uses. As company prices increase, their
cost of capital - and therefore their expected stock returns
- drop. Old established businesses become safer, less innovative,
and offer lower expected returns. In the face of these lowered
returns, investors sell and reinvest in smaller companies with
higher costs of capital and more promise of return. The "freeing" of
capital is a growth engine of modern economies. It drives much
of the progress we experience not only in our investments but
in society itself."
"Trying to identify "mispriced" securities
is a costly form of speculation. Markets work because investors
tend to be rewarded for risking their hard-earned capital.
After all, no rational investor would hold a stock unless
he expected a return, so the markets job is to set the price
of every stock to make it worth holding. This doesn't mean
you can't beat the market; it means that the only way to
increase expected return over the market (or any benchmark)
is to expose your portfolio to greater systematic risks.
And the best way to identitfy these risks is through science." -
Eugene F. Fama, Jr., Microcosm, in Matrix Book, 2007
"I have personally read hundreds of books on finance,
the stock market, and economic and financial history (I read
about 20 books a year on the subjects). Of course, there are
many fascinating well-written books, but I can honestly say
you really only need to read two or three books to get started
studying the science of finance (Capital Ideas) and applying
some of the principles to your own benefit (The Intelligent
Asset Allocator or Mark Hebner's Index
Funds[: The 12-Step Program for Active Investors]- New!)"
- John P. Scordo, Esq. research-finance.com
As seen in Humberto Cruz’s
nationally syndicated column: “The Savings Game” – January
31, 2007
"Question: We have used a financial planner for years.
His annual fee based on the amount of money we invest is
now several thousand dollars. Should we dump the planner
and purchase index funds instead? We don't have time to monitor
our investments day to day.
Answer: As much as I like index funds, it is not an either-or
question between using them or a financial planner. Many
fee-only planners (those who are paid a fee rather than commissions
on products) use low-cost index funds for their clients'
portfolios. These planners' job is to recommend and monitor
the asset allocation, based on each client's goals and risk
tolerance.
… And planners more than earn their keep when they
help investors stick to a disciplined long-term plan during
market declines. From your question, I gather you are not
too happy with your investment results and/or your investment
expenses, including the planner's fee, and figure you can
do better with index funds. That may be, but you still have
to choose an asset allocation and monitor it periodically
to make sure it remains appropriate. In addition to the Web
sites mentioned earlier, index fund fans can get valuable
information at www.indexfunds.com...”
If you would like to speak to an advisor as referred to in
Humberto Cruz’s article, please click here,
or call Index Funds Advisors - toll free 888-643-3133.
The SEC should turn over a new
leaf and dedicate itself at every opportunity to preaching to
the public that individual stock picking is a mug's game -- that
indexing and other low-cost, buy-and-hold strategies are a better
way to make America's peerless capital markets work for them.” Holman
W. Jenkins, Jr., Agency Interrupted, Therapy for the SEC begins
with the "Efficient Markets"
Hypothesis. The Wall Street Journal; Jan. 12, 2005; Page A11
From Fama's analysis of the "behavioral
finance" challenge to his market efficiency hypothesis, "...
the expected value of abnormal returns is zero, but chance
generates apparent anomalies that split randomly between under-reaction
and over-reaction [to market news]."
Do you understand
the uncertainty of
your expected return? The dirty little four letter word of
investing is RISK, and risk is the uncertainty of expected
returns. If you don't know the risk or uncertainty of your
portfolio, we suggests you find a new one. IFA has 20
of them. Click on the curtain to learn more. Take the Risk
Capacity Survey. It will match you to one of 20 index
portfolios. The most important question for investors is, "Which
portfolio of index funds is right for me?"
-
CNN Money: Buffett's Investment Advice
