Index Funds: The 12-Step Recovery Program for Active Investors
Format: PDF / Kindle (mobi) / ePub
UPDATED for 2015 - This book reveals the potential land mines and pitfalls of active investing and educates readers on the benefits of passive investing with index funds. Hebner's book details the possible perils associated with stock picking, mutual fund manager picking, market timing, and other wealth depleting behaviors. This 12-Step Program teaches the differences between active and passive investing, explains the emotional triggers that impact investment decisions, and offers an enlightening education on science-based investing that may forever change the way an investor perceives the stock market. Hebner sets forth a sound strategy that involves risk-appropriate investing that may empower investors to lead a more profitable and relaxed life.
See more at: youtu.be/gjyjyBPF-bI
co-author “Stocks, Bonds, Bills and Inflation,” an annually updated study that is widely recognized as the most comprehensive empirical study of stock market returns available. Also in 1973, David Booth helped develop a market-cap-weighted S&P 500 index fund for Wells Fargo Bank. Sinquefield and Booth teamed up in 1981 to launch Dimensional Fund Advisors, a mutual fund company committed to the construction of passive funds that efficiently capture the specific market risk factors identified by
reason to perpetuate the myth that financial journalists or “Fortune Tellers” can pick the handful of stocks to achieve wealth. In fact, by the looks of it, the best way to lose a fortune is to follow Fortune. BOND PICKERS The benefits of passive investing also apply to the fixed income portion of an investor’s portfolio. There is a pervasive falsehood that while the stock market may be efficient, the bond market is a different story. This myth has been negated over the years. The first major
the financial gains that come with a winning mutual fund manager, manager pickers blindly chase the hot performing mutual fund manager’s recent track record, failing to realize their odds for future success have vastly diminished. Figure 5-1 shows the results of a study using Morningstar data reflecting the performance of active fund managers for the 11 years from 2002 to 2012. The chart depicts how an average of only 7.1% of the top 100 fund managers repeated their performance the following
most one percent, are capable of pulling it off. Heck, if Helen Young Hayes, Robert Sanborn, Julian Robertson, and the nation’s largest pension funds can’t get it right, what chance does John Q. Investor have?” – William Bernstein, Ph.D., M.D., “The Probability of Success,” 2003 “Index funds are the only rational alternative for almost all mutual fund investors.” – Mark Hulbert, “The Prescient Are Few,” NY Times, July 13, 2008 “What if your advisor talks only about returns, not risk?
and creates art and illustrations for Index Funds Advisors, biomedical manuals, magazines, art exhibitions, and many private collectors. APPENDIX A The index data described throughout this book are based on the IFA Indexes. Throughout the book, the index names are the same, except IFA has been omitted. The following descriptions of IFA Indexes indicate how the indexes are strung together to simulate similar risk and return characteristics back to 1928. This long-term data reduces the