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.
Want
to learn about investing?
R E A D - A - B O O K !
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?"
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