Customer Reviews

All About Index Funds (All About... (McGraw-Hill))

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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.

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.

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.

If you're the do-it-yourself investor [cough..Vanguard..cough] that wants to avoid the Wall Street sleaze-and-hype machine and ride the Index wave - this book is definitely for you.

The book is very informative and easy to read in comparison to John Bogle's first book - which is very dry and dull.

This book gave me the impetus to stop procrastinating and put together my portfolio of index funds. I cannot praise this book highly enough.

The book needs an update because a lot has changed over the past few years: the fallout from the tech boom, changes in tax laws, changes in index funds, etc.

This book is a very appropriate mix of theory and technical application. There are too many books that focus on one to the exclusion of the other. There were sound principles that every investor should be familiar with (whether or not you agree with them) and there are some very helpful practical advice on implementing the theories.
I think Passive, index fund investing is the ONLY way to properly invest. For those seeking more drama, I recommend dedicating no more than 10% of your portfolio to stock picking and timing or just send your money to me. In the end it will be the same result.
This book gives a great overview for a very serious approach to investing in Mutual Funds. I refer to it all the time. For the price of the book, I recommend it.

Many of the details about indexing investments have been around for quite some time. This book is intended to be a primer on the subject, however there are numerous updates as well as individual insights that make this book worthwhile.

Richard Ferri writes a great book on the use of index mutual funds. His advice for the investor is clear and concise. In the book he covers all of the important points that one needs to learn about building a portfolio of index mutual funds. You cannot go wrong following his advice.

Loaded with more information than you ever wanted to know about Index Funds and the somewhat new ETFs. Well written and with a better editor than the last time around, this book is a must read for those who desire to know all there is to know about funds and which firms to invest with, (hint, Vanguard).

After reading most of the available books on index funds, and many of them give both the reasoning for, and the advantages of, investing in such funds, I believe this latest one is the best of the bunch. It provides not only the various powerful arguments for such investing, but also suggests specific portfolios of index funds for different classes of investors.

Although each investor has his or her own individual situation, which must be carefully analyzed before any investment plan is generated or changed, Ferri's book is a good guide toward making the best choices.

After studying the various investment choices available to the individual investor, I have concluded that unless the investor has some really specific and unique knowledge of any particular company, or possiby industry, investing in individual stocks or bonds can be highly speculative. Investing in mutual funds provides some degree of diversification, but most managed (not index) funds show a long term return which is significantly less than that of index funds, and those few managed funds that have "beaten the average" in the past, generally do not continue to do so. Moreover, the 1% or more of expense ratio of managed funds takes a really big bite over time when the compounding interest effect is taken into account.

I'm a total noob to the market and investing but this book explained so much. I think its a must read for anyone looking into investing for their future and have no idea where to start.