Customer Reviews

Index Funds: The 12-Step Program for Active Investors

5 star:		(39)
4 star:		(7)
3 star:		(3)
2 star:		(2)
1 star:		(1)

 

 

The author takes complex topics and makes them easy to understand ... with an intent of saving others from the mistakes he had made as an active investor -- trading stocks, investing in a variety of mutual funds, etc. Instead the book lays out the many benefits of index investing and provides a framework for someone to begin doing so through the highly regarded passive/index investment firm Dimensional Fund. This is the only investing book I've ever been able to read and enjoy every page of.

I spent a weekend reading this book cover to cover and I couldn't be more pleased. This book eloquently summarized my four years of Masters coursework, not to mention decades of academic research, in a style that is compelling and easy to grasp.

Reading this book will help you understand why a globally-diversified, risk-capacity-matched, small-value-tilted, low-cost, tax-efficient index portfolio is the only smart way to invest. You will understand exactly why stock pickers, mutual fund managers, and market timers mathematically cannot beat the market over 10 or 20 year periods... while the very few that do are the result of chance, despite their claims to the contrary.

You may also want to watch the Nova special, "The Trillion Dollar Bet".

If you are like me, you have spent far too much time and money learning the ugly truth about investing. Nobody can consistently over time beat the market. Nobody. This book is about a revolutionary idea and an obvious one: Invest with the market and win with the market.
This does not mean that "one size fits all," that there is just one strategy everyone should use. In fact, the author puts forward 20 separate portfolio strategies, each with a "play with the market" approach. Each with its own risk/return specifics. Each one a winner over the past 35 years.
This attractive book is literally worth it's weight in gold. Actually, it's worth well more than that.

To quote a few lines of Jack Nickelson and Tom Cruise from A Few Good Men...

Jessep/Nickelson: You want answers?
Kaffee/Cruise: I want the truth!
Jessep: You can't handle the truth! Son, we live in a world that has walls. And those walls have to be guarded by men with guns.

In the investment world, the "men with guns" are the active fund managers and the brokers who sell those active funds. They make so much money from fleecing the unsuspecting public that they need to have "guns" to keep the public from getting the Truth. In the investment world "guns" are slick advertising, performance propaganda, big commissions and false promises, all which serve to misinform the public of the Truth. This book exposes it all and gives you the Truth about how active management is SO poor when compared to low-cost, tax-efficient index/DFA funds. If you CAN handle the Truth, you need to read this book today!

Mark Hebner continues the service he has performed so well for investors that started with his outstanding web page[..]. In this book, he takes much of the material that can be found on his web page and puts it in his book, in an easy to understand, and overwhelmingly convincing manner. It is impossible to believe that any objective person reading this book could fail to be convinced that the investing public continues to be deceived by the financial services industry. I would urge every investor to buy this beautifully designed book, read it carefully and implement the investment philosophy explained with such care and precision in it. Not only will investors reap the rewards of being in the top 5% or so of all professionally managed money over the long term, but they will have the satisfaction of knowing that they will no long fall prey to the avarice of the brokerage community and other advisors who profess to have skills that neither they, nor anyone else, possess. Daniel R. Solin, author, Does Your Broker Owe You Money?

Having worked in the financial services industry for over 20 years, I have known about our "dark secret" for a while. Over the years I have provided thousands of "addicts" with their fixes, thinking if I don't, someone else will. Now, having come out of the closet of "smoke and mirrors", I can only hope that a book like Mark Hebner's 12 Steps gets a huge following among all types of investors. It wouldn't hurt many of my colleagues in the industry to read it too. Who knows, our profession might even get back some of the respect which we have succeeded in loosing totally. I am finally able to meet my clients with a straight face.

If you only read one book on investing - it should be this one! Mr. Hebner considers active investing in the stock market to be similar to gambling and offers his index funds investment strategy as a "12 step cure" for active investors. He offers compelling evidence to justify this perspective in an easy to read and understandable manner. Bottom line - if active investing is analogous to gambling then Hebner's index fund strategy is like "betting with the house" and having the house's odds on your side.

(FYI: The book can be read online, and pdf's of each chapter downloaded, for free, at the IFA website)

In part the book is an advertisement for the author's IFA investment company. It also provides the evangelical gospel about index investing in a very clear fashion. It's perhaps the most artistic book on investing ever published, and for me, very educational. The diversified portfolio examples alone are well worth the price of the book. Vanguard could learn a whole lot from the IFA website about how to present complex information to the public in an easy to understand way.

Here's the lowdown. There are two main index fund companies, Vanguard, and Dimensional Fund Advisors. Vanguard provides, for better or worse, true index funds. Dimensional Fund Advisors ($100 Billion company) provides mostly true index funds. One article termed it "DFA's brand of passive investing is not quite indexing. It eschews reliance on stock picking and market timing, which indexers also do, but it doesn't tie itself slavishly even to its own custom-produced indices." DFA seems more sophisticated in their ways than Vanguard.

As a side note, DFA is partly owned by the Governator Mr. Arnold, along with a bunch of genuinely smart people.

DFA doesn't sell funds directly to individual investors, preferring to sell their funds via independent advisors, of which there are many. IFA, owned by the author of this book, is one such independent advisor.

Best case scenario, DFA "may" outperform a comparable Vanguard Index recipe by as much as 2%. However, IFA's fees (IFA + DFA's + Schwab or Fidelity fees), on average, seem way higher than Vanguard's, to my figuring 5- 10 times higher depending on the fund. Thus one has to ask, is it worth the potential 2% increase in a IFA (DFA) fund when you give at least 1 percent of that back in fees? That's one to ponder.

Also, while I appreciate IFA making this very insightful index (passive) investing info available to the average person via an inexpensive book or for free via the website, I found it disappointing that the "average" investor may have a hard time meeting the $100,000 IFA account minimum. On that front, Vanguard is very much a company for the people as the minimums are way way lower.

All that aside, the book does a fantastic job of teaching the ins and outs of index fund investing and theory. Just be on guard about the rest of it and don't get sucked in to IFA until you have examined the pros and cons in depth. There are many other authorized DFA vendors out there, but I haven't had time to research them yet thus can't say if IFA's fees are high or low for the DFA universe.

This is an excellent book. It reviews the financial data from academic studies done over the past 75 years regarding the stock market and active versus passive investing. The data is quite compelling that active managers seldom beat the market over time. The authors then go the final step to propose a portfolio of passive index funds that is widely diversified throughout the world and throughout asset classes. They propose 20 different "portfolios" to choose from depending on your risk tolerance and long term goals. The book is an offer to invest with "their" company, but the principles can be easily applied to a do it yourself approach. All in all I am VERY glad I bought this book and highly recomend it to anyone who invests in the stock market.

This is one fantastic piece of work. The author's passion for teaching others shows in this complete, yet concise, guide. With lots of colourful charts and many compelling stories, you can't help but come away a better investor. Awesome.