All About Index Funds (All About... (McGraw-Hill)) [Paperback]

Richard A. Ferri (Author)

Book Description

Publication Date: July 15, 2002 | Series: All About... (McGraw-Hill)

ALL ABOUT . . . SERIES

All About
INDEX FUNDS

Index mutual funds routinely outperform 80 percent of managed funds, and more investors than ever are embracing index funds to eliminate the anxiety and expense of trying to "beat the market." All About Index Funds covers aspects including key benefits of index fund investing, how to create a custom index fund that suits specific investing needs, effective portfolio techniques and model portfolios, and more.

Editorial Reviews

From the Back Cover

Everything You Need to Know About Index Funds­­What They Are, Why They Outperform Managed Mutual Funds, Which Are Right for You, and More!

Little known just five years ago, index mutual funds have become one of today's most popular vehicles for investors weary of trying to beat the market. All About Index Funds explains the ins and outs of these easy-to-use investments, and reveals how they can give you the advantages of a highly diversified portfolio for as little as $500!

"Ferri is right! This book tells you why, and how to get started."­­John C. Bogle, Founder and former chairman, The Vanguard Group

"Ferri's book is an engaging one-stop storehouse of knowledge on index funds. It is a vital roadmap for those seeking higher returns and lower risk."­­William Bernstein, Author, The Intelligent Asset Allocator

"Once you read this book, you will no longer listen to the hype from Wall Street stockbrokers and their analysts who are paid to make money from you, not for you."­­Larry Swedroe, Author, What Wall Street Doesn't Want You to Know

Whether you are an experienced stock market investor or a beginner, look to All About Index Funds to learn more about:

• Tax advantages of index funds
• Exchange-traded funds
• SPDRs
• HOLDRs
• Global funds
• Customized funds
• Asset allocation
• Understanding risk
• Taxable versus nontaxable strategies
• Index fund providers
• and much more

About the Author

Richard A. Ferri, CFA, is president and senior portfolio manager of Portfolio Solutions, LLC, and an adjunct professor of finance at Walsh College in Michigan. He is the author of Serious Money: Straight Talk About Investing for Retirement, and contributes to several investment magazines and websites.

Product Details

• Paperback: 275 pages
• Publisher: McGraw-Hill; 1 edition (July 15, 2002)
• Language: English
• ISBN-10: 0071387056
• ISBN-13: 978-0071387057
• Product Dimensions: 9 x 6 x 0.8 inches
• Shipping Weight: 11.2 ounces
• Average Customer Review: 4.5 out of 5 stars  See all reviews (24 customer reviews)
• Amazon Best Sellers Rank: #1,094,351 in Books (See Top 100 in Books)

More About the Author

Richard Ferri is the founder of Portfolio Solutions, LLC (www.portfoliosolutions.com), a low-fee investment advisory firm based Troy, MI. Portfolio Solutions manages close to $1 billion in separately managed accounts for high-net-worth individuals, families, non-profit organizations, and corporate pension plans. The firm specializes in analyzing and using low-cost and tax-efficient index funds and ETFs to build wealth for clients.

Mr. Ferri earned a Bachelor of Science degree in Business Administration from the University of Rhode Island and a Master of Science degree in Finance from Walsh College. He also holds the designation of Chartered Financial Analyst (CFA). Prior to joining the investment community in 1988, Rick served as an officer and jet pilot in the U.S. Marine Corps and is now retired from the Marine Corps Reserve.

Customer Reviews

Most Helpful Customer Reviews

84 of 85 people found the following review helpful:

5.0 out of 5 stars Excellent Primer on Index Funds, September 19, 2002

By 

L. Masonson (Monroe, New York USA) - See all my reviews
(REAL NAME)   

This review is from: All About Index Funds (All About... (McGraw-Hill)) (Paperback)

This...McGraw-Hill paperback will provide readers with a terrific return on their investment. Author Richard Ferri provides detailed information on all aspects of index funds as well as how to put together a rationale portfolio of index funds depending on your risk parameters.

This well organized easy to read 275-page book contains 16 chapters on everything you wanted to know about index funds, including:
- Different types of funds and their composition
All about exchange traded funds (ETFs), their features and advantages
Sector index funds, REIT index funds, Merrill Lynch HOLDRS
Global and international index funds
Bond index funds
Enhanced, leveraged and inverse index funds
Tax-advantaged index funds
- Indexes as benchmarks
- Advantages of index funds over standard mutual funds
- Comparison of index funds to actively managed funds for 5,10 and 20-year periods

Then Ferri details how to create your own customized index fund portfolio using an Internet server. He covers what you should realistically expect to earn from your portfolio based upon historical returns since 1950. Next, he reviews the critical subject of asset allocation and the necessity of having a diversified index portfolio that should be rebalanced each year.

Ferri provided guidance on defining your financial goals. He covers determining your future financial needs, developing your current earnings and earnings power, assigning asset allocation parameters, and then stress testing your bond and stock asset allocation. He provides a 5-step method to help determine your asset allocation (setting goals; making an inflation adjustment; determining a savings plan and required return; deciding on asset allocation; and assessing risk).

One chapter pinpoints how to design your index portfolio. He mentions that taxable and non-taxable portfolios should be managed differently. Ferri recommends a simple portfolio for a taxable account. He advises that more complex strategies be used in non-taxable accounts. Ferri illustrates a three-index portfolio and a high-income portfolio using REITs and High-Yield bonds.

The appendix contains a list of 28 low-cost index fund families with phone numbers, 14 useful investment advice and index fund websites, and 12 books about index funds. There is also a 9-page glossary and an 8-page index.

Overall, this book covers all the bases on index fund investing in an easy-to-read style. I highly recommend this book to investors who need to know about these very useful funds.

38 of 39 people found the following review helpful:

5.0 out of 5 stars Great Book on Index Funds, January 2, 2006

By 

Dale C. Maley "Index Fund Investor" (Fairbury, IL United States) - See all my reviews
(VINE VOICE)    (REAL NAME)   

This review is from: All About Index Funds (All About... (McGraw-Hill)) (Paperback)

Although I have been investing in and studying index mutual funds since 1990, I still learned a few things in this book.

I enjoyed Ferri's method of determining his client's risk tolerance. He puts his clients through one of our most recent Bear Markets, 1973-1974, and sees if they can stand the losses to their portfolio with a starting asset allocation. If they can't stand the losses, he adjusts the asset allocation to a lower risk allocation until they can stomach the losses.

I also enjoyed his explanation of Modern Portfolio Theory. His hypothetical example shows that a portfolio made up of stocks and bonds actually has a slightly higher return and slightly lower risk than you would expect using simple math.

Ferris is also willing to go out on a limb and predict returns for various asset classes and inflation for the next 30 years. He seems to agree with Buffett that stocks will deliver a nominal return of 8% versus the 70 year average of 11%. Of course Buffett predicted stock returns in the 1980's would be in single digits and the S&P returned a compounded nominal of 18%.

Ferri does a great job of explaining why index funds outperform actively managed funds over long periods of time.

All in all, it is a very informative book.

I would suggest companion books to supplement this book including The Richest Man in Babylon, Bogle on Mutual Funds, The Millionaire Next Door, The 4 Pillars of Investing, A Random Walk Down Wall Street, Wealth of Experience: Real Investors on what Works and What Doesn't, The Coffeehouse Investor, and the Armchair Millionaire.

25 of 25 people found the following review helpful:

4.0 out of 5 stars Indexing Handbook, January 16, 2003

By 

dennis wentraub (schenectady, new york USA) - See all my reviews
(VINE VOICE)    (REAL NAME)   

Amazon Verified Purchase

This review is from: All About Index Funds (All About... (McGraw-Hill)) (Paperback)

The basic idea of an index mutual fund is that it mimics the long term returns of the market. It does so with less risk, more simply, with lower costs, and greater consistency than the much greater number of actively managed (and widely promoted) funds available to investors. Tracking the markets rather than attempting to outperform them may seem, in Ferri's words, like "watching grass grow", but consistency over a long period means superior returns and eliminates the black hole of underperformance. Recent books by Larry E. Swedroe, William Bernstein, Charles D. Ellis, and others make more detailed cases for using the index fund strategy, but ALL ABOUT INDEX FUNDS provides needed nitty-gritty information about the rationale and composition of many indexes from which to develop an appropriate investment strategy. The extraordinary growth of exchange traded funds (ETF) that track market, country, and sector indexes have introduced both flexibility and confusion to the choices that are available. Ferri does a good job of identifying the major index providers, what their indexes represent, the funds that track their movement, and the potential overlap and inefficiencies that result from mixing index providers. A student of modern portfolio theory (MPT), Ferri is an advocate of diversifying investments across several asset classes that respond a little differently at different times to reduce volatility and improve overall returns. It follows that the most important allocation decision is the percentage mix of stocks and bonds. In Chapter 15, "Designing Your Index Fund Portfolio", these allocation issues are tackled in some detail. Suffice to say a typical Ferri index portfolio may consist of some percentage of US stocks, foreign stocks, US bonds, and Real Estate Investment Trusts. This book is not long enough to adequately cover all the topics Ferri addresses, but it is an excellent starting point.