1 IFA | 12-Step Brochure Step 1: Active Investors Step 5: Manager Pickers Step 9: History Step 2: Nobel Laureates Step 6: Style Drifters Step 10: Risk Capacity Step 3: Stock Pickers Step 7: Silent Partners Step 11: Risk Exposure Step 4: Time Pickers Step 8: Riskese Step 12: Invest and Relax
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1 IFA | 12-Step Brochure
Step 1: Active Investors
Step 5: Manager Pickers
Step 9: History
Step 2: Nobel Laureates
Step 6: Style Drifters
Step 10: Risk Capacity
Step 3: Stock Pickers
Step 7: Silent Partners
Step 11: Risk Exposure
Step 4: Time Pickers
Step 8: Riskese
Step 12: Invest and Relax
2 IFA | 12-Step Brochure
IFA | 12-Step Brochure
Table of Contents
Ver. 2-10-2016
IFA’s Team and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Value of a Passive Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Overview of Index Funds: The 12-Step Recovery Program for Active Investors . . . . . . . . . . . . .4-5
Step 1: Active Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Step 2: Nobel Laureates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Step 3: Stock Pickers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Step 4: Time Pickers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Step 5: Manager Pickers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Step 6: Style Drifters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Step 7: Silent Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Step 8: Riskese . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Step 9: History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Step 10: Risk Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Step 11: Risk Exposure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Step 12: Invest and Relax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
IFA Index Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
IFA Index Portfolio Data: Risk & Reward Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
IFA Index Portfolio Data: High-Low Comparison Table . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
IFA Index Portfolio Fact Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Disclosure for Backtested Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
Sources and Description of Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
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Index Fund Advisors, Inc . (“IFA”) is a registered investment adviser with the Securities and Exchange Commission and is based in Irvine, California . IFA is a fee-only advisory firm founded in 1999 to provide its clients individual risk-appropriate passive investing strategies with a fiduciary standard of care . IFA’s investment advice and portfolio implementation are designed for individuals, retirement plans, trusts, endowments, foundations, and other accounts . IFA has over 2,100 clients located throughout the country and manages $2 .74 billion of assets as of December 31, 2015 .
IFA’s investment philosophy is based on five principles that derive from academic research, much of which has been recognized with the awarding of the Nobel Prize in Economic Sciences:
1) Financial markets are efficient. Prices in free markets fully incorporate available information, and prices change to reflect any unexpected new information so that the current price is the best estimate of a fair price .
2) Risk and return are inseparable . While there is no such thing as return without risk, not all risks are rewarded . Long-term historical risk and return data informs IFA’s investment selection process, and IFA’s Index Portfolios seek to capture the risk factors that have shown to most appropriately compensate investors for risks taken .
IFA’s Team and Investment Philosophy
These risk factors include market, size, value, and profitability for equity and term and default for fixed income.
3) Diversification is essential. Diversification both within and among asset classes allows investors to effectively capture the returns offered by the financial markets, in accordance with their risk capacity.
4) Structure explains performance . The expected return of a diversified portfolio is determined by its exposure to the compensated risk factors, as explained previously . The high costs and risks of active management are unnecessary and potentially harmful to an investor’s long-term outlook .
5) Advisor Advantage . There are distinct and quantifiable benefits to enlisting the services of a passively oriented advisor. These benefits include disciplined rebalancing, tax loss harvesting, asset location, and glide path .
IFA matches its clients with risk-appropriate portfolios comprised of globally diversified blends of index funds, primarily from Dimensional Fund Advisors (DFA) . IFA works with three reputable firms that serve as custodians to hold and protect client assets: Charles Schwab & Company, Fidelity Investments and TD Ameritrade . IFA clients make the choice .
For updates, and further information, visit ifa .com .
3 IFA | 12-Step Brochure
The Value of a Passive AdvisorAs low-cost index fund investing continues to gain in popularity, numerous researchers have turned their attention to quantifying the value a passive advisor can bring to an index portfolio . One such study conducted by Vanguard, the leading provider of index funds quantified the “advisor alpha” at 3% . This advisor alpha is the sum of the value added by advisors who adhere to the principles of controlling costs, maintaining discipline and tax awareness, relative to other advisors or unadvised investors . The greatest contribution a passive advisor brings is behavioral coaching, according to the study — or as William Bernstein so succinctly puts it: “Wall Street is littered with the bones of those who knew just what to do, but could not bring themselves to do it .” The breakdown of the advisor alpha set forth in Vanguard’s study is shown below .
IFA has compiled the findings of 20 financial industry studies (including our own internal studies) that have explored the success investors have had at capturing fund returns . Collectively, the summary of the research reveals that the average active investor and do-it-yourself indexer did not capture the full return of the funds they invested it . The advised indexer—or an investor who relies on the services of a passive advisor—did better. Specifically, active fund investors without passive advisors (blue bars) captured an average of 50% of the actual returns delivered by the funds over various time periods (Data for all studies is found in the Appendix) . Do-it- yourself indexers without passive advisors (purple bars) did better than active investors, but still only captured an average of 79% of the index fund return . A knowledgeable passive advisor can provide several services, including the critical discipline needed to combat emotional, reflex reactions. When advice is combined with funds from DFA, a science-based passive fund company, investors avail themselves of the opportunity to keep more of what the market delivers . A 10-year study conducted by Morningstar concluded that those who invested in DFA funds captured up to 109% of the fund returns, thanks to the “very smart behavior” that is practiced by passive investment advisors who have committed to helping their clients understand the sources of stock market returns, the impact of emotions, and the value that science-based investing can bring to a portfolio . 1-20
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Overview of Index Funds: The 12-Step Recovery Program for Active Investors
STEP 1 - ACTIVE INVESTORS: Recognize an Active Investor Active investors try to pick winners among the many stocks, times, managers, and investment
styles . These investors must not realize that markets are moved by news, which is unpredictable and random. Markets are also efficient, meaning that news is rapidly reflected in market prices. As a result, active investing is not expected to be a profitable strategy. A more reliable source of long-term returns is consistent exposure to economic risk factors backed by more than 88 years of historical data .
STEP 2 - NOBEL LAUREATES: Defer to the Higher Knowledge of AcademiaThe research of many academics and Nobel Prize winners has explained the efficiency of financial
markets and the risk and reward connection. Their findings are unbiased, as these academics aren’t trying to earn a commission or sell magazines and newspapers . More than a hundred years of academic research point to index funds investing as a sound investment strategy . Sadly, the great majority of investors have never read these academic studies and continue to actively invest .
STEP 3 - STOCK PICKERS: Accept That Stock Pickers Do Not Beat the Market Stock picking is similar to gambling in that bets are placed on certain companies in the market . An
academic study21 found that 99 .4% of active fund managers (who supposedly should be among the best of stock-pickers) displayed no evidence of genuine stock-picking skill, and the 0 .6% of managers who did outperform the index were “just lucky .”22 An additional study23 conducted by Standard and Poor’s found that there is no persistence of stock-picking ability beyond what we would expect from chance alone .
STEP 4 - TIME PICKERS: Accept That Time Pickers Cannot Time the MarketThere is no evidence that market timing “gurus” can consistently time the market . A peer-reviewed
study24 analyzed more than 15,000 predictions by 237 market-timing investment newsletters from June 1980 through December 1992 . The authors found that almost 95% of the newsletters had gone out of business, with an average length of operations of about four years . They also found that over 75% of the newsletters actually erroded value relative to a simple mix of cash and the S&P 500 Index . The authors concluded, “There is no evidence that newsletters can time the market .”
STEP 5 - MANAGER PICKERS: Realize That Winning Managers Were Just Lucky The so-called “star” money managers have a knack for attracting new mutual fund investors, charging
a hefty fee for gambling with clients’ money . Even more disturbing, results of a study of 8,755 institutional managers show that, on average, the managers who beat their benchmarks for three years before being hired then lost to their benchmarks in the following three years . The same study also looked at 660 hiring and firing decisions and concluded that the managers who were fired beat the new hires in the next 3-year period .25 Attempting to choose the next hot fund manager is futile .
STEP 6 - STYLE DRIFTERS: Comprehend Active Management Style Drift About half of mutual fund managers drift from one recent style winner to another, playing carelessly with
investors’ money . The investment objective stated in the prospectus of funds is altered by these changes . The Standard & Poor’s Indices Versus Active Funds Scorecard (SPIVA®) is a report that provides information on the consistency or “persistence” of funds staying true to their styles . Data from the Mid-Year 2014 report reveals that only 51 .62% of mutual funds remained style consistent from 2009 - 2014 .26
5 IFA | 12-Step Brochure
STEP 8 - RISKESE: Understand How Risk, Return and Time are Interconnected Do you speak Riskese? Learning the language of risk will afford you a basic understanding of risk, return,
time, and diversification. Most investors chase the short-term returns of stocks, markets, managers, and styles, because they don’t understand that risk is the source of stock market returns. Returns of diversified stock portfolios are explained by their exposure to five dimensions of risk: market, size, value, term and default28. All five factors are depicted in the renowned Fama/French Five-Factor Model, which serves as a framework for designing and analyzing diversified investment portfolios.
STEP 7 - SILENT PARTNERS: Recognize The Partners in Your Returns Silent Partners eat away at both realized and unrealized investment gains . They do this through fees,
expenses, taxes, and inflation. Over time, this can cost investors in actively managed funds nearly 55% of their ending wealth .27 On the other hand, investors can avoid both high costs and high taxes by employing a passive investment strategy, which allows them to keep a bigger share of their returns pie .
STEP 9 - History: Historical Risks and Returns of Indexes Long-term data is required to improve the estimates of the expected risk and return for different
investments . We now have more than 88 years of monthly risk and return data on 21 important IFA indexes . Since you cannot predict the future based on a small sample of recent events, the study of long-term stock market data is a valuable source of meaningful information, leading investors to a better characterization of the risks and expected returns of various asset classes and whole index portfolios .
STEP 10 - RISK CAPACITY: Analyze Your Five Dimensions of Risk CapacityWhat’s your risk capacity? A simple survey can analyze your five dimensions of risk capacity: time
horizon, attitude toward risk, net worth, income, and investment knowledge . Risk capacity can be regarded as a measurement of an investor’s ability to earn stock market returns. Calculating risk capacity is the first step in deciding which portfolio will be most appropriate for each investor . A risk capacity score determines the proper risk exposure for an investor’s portfolio .
STEP 12 - INVEST & RELAX: Rebalance, Tax Loss Harvest, Glide Path, and Asset LocateOnce you understand the lessons provided in this booklet, you will be able to invest and relax . That’s
what clients of IFA allow themselves to do when they experience IFA’s commitment to fiduciary duty, ongoing and sound advice, long-term risk and return data, rebalancing, asset allocation, asset location, the glide path, tax loss harvesting, and emotions management . These are just a sampling of the many advisory services that IFA provides its valued clients .
STEP 11 - RISK EXPOSURE: Analyze Your Five Dimensions of Risk ExposureInvestors can expect to achieve optimal results when their risk capacity score is matched with one of
IFA’s 100 Index Portfolios of comparable risk exposure . At IFA, we call this “matching people with portfolios .” Taking on the appropriate amount of risk enables investors to maximize their expected outcome . Each Index Portfolio is constructed with a specific blend of asset class funds that capture a quantifiable level of risk exposure . A properly designed index portfolio will include more than 13,000 stocks and bonds from over 44 countries around the world .
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Step 1: Active InvestorsRecognize an Active Investor
Active investing is a strategy that investors use when trying to beat a market or appropriate benchmark . Active investors rely on speculation about short-term future market movements and ignore vast amounts of historical data . They commonly engage in picking stocks, times, managers, or investment styles . These self-defeating practices of active investors unnecessarily increase their risk, expenses, taxes, and anxiety . Most importantly, the sport of speculation deprives investors of the returns they could earn if they would simply buy and hold a passively managed blend of globally diversified index funds matched to their risk capacity.
The chart below tells the story. It reflects the findings of a 2015 Dalbar study, revealing that the average equity fund investor significantly underperformed the S&P 500® over a 30-year period . The study shows that during the 30 years from 1985 through 2014, the average equity fund investor earned returns of only 3 .79% per year, while the S&P 500 returned 11 .06% . This means that the average equity fund investor grew a $100,000 investment to $305,257, while the growth of $100,000 invested in the S&P 500 would have been $2,326,645 . Even better, we see that a simulated passive investor who owned an all-equity, small-value-tilted, globally diversified index portfolio such as IFA’s Index Portfolio 100 would have grown a $100,000 investment to $3,281,199 over the 30-year period .29
“Most investors would be better off in an index fund.”— Peter Lynch, famous stock picker, Barron’s, page 15, April 2, 1990
7 IFA | 12-Step Brochure
Step 2: Nobel LaureatesDefer to the Higher Knowledge of Academia
Active investors disregard some of history’s most important lessons . Most do not read the peer-reviewed academic studies and Nobel Prize-winning economic research available . They instead rely on media messages to guide their investing decisions, largely unaware of the fact that media outlets profit handsomely from the advertising dollars of online brokers, trading services and active trader publications that encourage us to trade. Nearly 300 years of statistical, scientific and economic research explain why investors who buy, hold and rebalance an investment in global capitalism reap rewards in proportion to the risks they take . Three centuries of study
from notable scientists and researchers regarding risk, probability theory, statistics, the random nature of prices and asset-pricing theory have been painstakingly studied, analyzed and summarized by the legends of financial science, some of whom are depicted below . Collectively, these great minds have delivered to us a method of investing that is founded upon the principles of market efficiency, the returns of capital markets, and the “Invisible Hand” which guides market forces, prices, allocation of resources, the cost of capital, and the returns of capitalism. Investing according to the findings of these legends enables you to be a better investor .
Adam SmithBlaise Pascal
Burton MalkielDavid Booth
Eugene FamaPaul Samuelson
Harry Markowitz William Sharpe
Kenneth French
Louis Bachelier
Merton Miller
Rex Sinquefield Michael JensenJohn Bogle
Friedrich von Hayek
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Step 3: Stock PickersAccept That Stock Pickers Do Not Beat the Market
The financial press largely focuses on the daily movements of stocks and markets, showering rewards on those who are lucky enough to be in the right place at the right time . But it is virtually impossible for a stock picking fund manager or individual stock picking investor to consistently predict and invest in the stocks that will be future winners, based on the tenets of market efficiency. Stock pickers tend to be overly confident in their “skill” to generate alpha (defined as any return above the benchmark return), but studies have
shown that their “winning performance” is usually due to luck, not skill . Professors Laurent Barras, Olivier Scaillet and Russell Wermers conducted a study30 of 2,076 mutual fund managers over a 32-year period . They found that from 1975 – 2006, 99 .4% of these managers displayed no evidence of stock picking skill, and the 0 .6% of managers who did outperform the index were “statistically indistinguishable” from zero . In other words, they were “just lucky .”
“If there are 10,000 people looking at the stocks and trying to pick winners, well, one in 10,000 is going to score, by chance alone, a great coup, and that’s all that’s going on . It’s a game, it’s a chance operation, and people think they are doing something purposeful… but they’re really not .”
— Merton Miller, Ph.D., Nobel Laureate, PBS Nova Special, “The Trillion Dollar Bet,” 2000
9 IFA | 12-Step Brochure
Step 4: Time PickersAccept That Time Pickers Cannot Time the Market
Time pickers (market timers) mistakenly believe they can predict the future movement of the stock market, moving into the market before it goes up and getting out before it goes down . Such decisions usually do not fare well, because they are based on the fallacy that the direction of future price movements can be predicted . At any point in time, any investor can only know the current and past price of any given security . Nonetheless, market timing can be alluring, likely because investors don’t understand that the market continuously sets prices in response to news, which is unpredictable .
In a study titled, “Likely Gains from Market Timing,” Nobel Laureate William Sharpe concluded a market timer must
be correct 74% of the time in order to outperform a passive portfolio at a comparable level of risk .31 In 1992, SEI Corporation updated Sharpe’s study to include the average 9 .4% stock return from the period 1901 – 1990 . This study determined that gurus must be right at least 69% of the time .32
CXO Advisory Group tracks public forecasts of self-proclaimed market timing “gurus .” The chart below shows the percentage grades of 28 market timers who had made more than 100 forescasts from 2000 through 2012 . The study shows that not one of the “gurus” was able to meet Sharpe’s requirement of 74% accuracy, or SEI’s minimum 69%, thereby failing to delivery accuracy sufficient to beat a simple index portfolio.33
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Step 5: Manager PickersRealize That Winning Managers Were Just Lucky
“Most people think they can find managers who can outperform, but most people are wrong . I will say that 85% to 90% of managers fail to match their benchmarks, if you properly specify their benchmarks .”
— Jack Meyer, former Harvard Management CEO, Harvard University Endowment Businessweek.com, Interview Excerpt, Dec. 27, 2004
Active investors unnecessarily increase their risk, expenses, taxes, and anxiety . Numerous studies have shown actively managed investments generally carry more risk and lower returns than globally diversified, risk-calibrated index portfolios . Despite this fact, investors frequently fall prey to the allure of past winners, hiring the hottest new fund managers only to fire them later because their past performance doesn’t persist in subsequent periods .
A 10-year study conducted by Amit Goyal of Emory University and Sunil Wahal of Arizona State University found that manager hiring and firing decisions made by consultants, board members and trustees were a complete waste of time and money . The study, “The Selection and Termination
of Investment Management Firms by Plan Sponsors,” reveals the negative impact of manager picking . The results of hiring 8,755 managers shown below, illustrate that during the 10-year period from 1994 through 2003, managers that were hired had outperformed their benchmarks by 2 .91% over the three years before being hired . However, over the following three years the managers underperformed their benchmarks by 0.47% per year. Plan sponsors often proceeded to fire their underperforming managers in favor of other recent top performers, only to repeat the cycle again . The study concluded, “In light of such large transaction costs and positive opportunity costs, our results suggest that the termination and selection of investment managers is an exercise that is costly to plan beneficiaries.”34
11 IFA | 12-Step Brochure
Step 5: Manager PickersRealize That Winning Managers Were Just Lucky
Step 6: Style DriftersComprehend Active Management Style Drift
Style drift occurs when an active manager drifts from a specific style, asset class or index that is described as the stated investment purpose of a fund . Style drift is a serious problem for investors who believe they are invested in a portfolio that matches their risk capacity . Since managers of active funds seek to outperform the benchmark, they often wander outside the boundaries of the benchmark, altering the fund’s exposure to risk and its volatility of returns .
One particularly egregious example of style drift is the Fidelity Magellan Fund as shown in the top figure below.
In the 34-year period from 1982 to 2015, Magellan morphed and evolved several times . For example, in mid-1995, the fund looked like a large value fund, despite the fact that its benchmark was the large blend S&P 500 .
In contrast to the style drifting tendencies of actively managed funds like Fidelity’s Magellan, passively managed funds (specifically those provided by DFA) adhere to strict rules of construction and are held constant regardless of market conditions. The figure on the bottom shows the relative style purity of the DFA U .S . Large Company Portfolio, which also has the S&P 500 as its benchmark .
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Step 7: Silent PartnersRecognize The Partners in Your Returns
There are many silent partners that quietly but determinably eat away at an active investor’s returns pie . A partial list of silent partners that erode investors’ returns includes state and federal taxes, sales commissions, mutual fund expense ratios, fund turnover, and transaction costs .
A John Bogle study concluded that over a 25-year period, $10,000 invested in the average managed equity fund grew to a pre-tax value of $108,300, and an after-tax value of $71,700 . In contrast, $10,000 invested in the S&P 500 grew to a pre-tax value of $181,800 and an after-tax value of $159,000 .35
Part of the disparity in ending wealth is due to active managers charging higher fees than passive managers as compensation for their perceived “skill .” In both U .S . and non-U .S . strategies, the average actively managed fund is more expensive than the average passive fund .
The bar chart reveals the disparity in average expense ratios between all mutual funds and IFA Index Portfolio 60 . As of December 2015, a similar portfolio of all mutual funds would have been almost three times as costly as IFA Index Portfolio 60 .
Turnover is also a silent devourer of wealth . Active mutual funds are known to have higher turnover rates than passive funds, creating tax liabilities that erode returns . Even for non-taxable investors, high turnover can be expensive . A recent article in the Financial Analysts Journal stated that the average annual cost of trading incurred by equity mutual funds was 1 .44%, which even exceeds the average expense ratio of 1 .19% .36
Although most index funds are tax efficient by nature, some indexes can be further tax-managed to save an investor more in taxes. Tax-managed index funds are efficient at offsetting realized gains with realized losses, deferring the realization of net capital gains and minimizing the receipt of dividend income. The benefit is that unrealized capital gains remain a growing part of the net asset value of a fund and assists in overall wealth accumulation .
“Some of active management’s true believers will shift assets from expensive products to more reasonably priced products . Impetus for this move will be the growing realization that high fees sap the performance potential of even skillful managers .”
— Richard M. Ennis, editor, Financial Analysts Journal, as quoted in John C. Bogle’s The Little Book on Common Sense Investing
13 IFA | 12-Step Brochure
Step 8: RiskeseUnderstand How Risk, Return and Time are Interconnected
Index funds investors are optimally rewarded for understanding and shouldering stock market risk . In fact, the very reason investors should expect to earn a return is because of the risks they take . The key is to take the risks that have shown to compensate investors and to diversify away uncompensated risks . Stock concentration, fund manager speculation, performance chasing, market timing, and sector concentration are uncompensated risks that carry no additional expected return beyond that of a market portfolio .
The beneficial relationship between risk and return for passive investors is set forth in the scatter plot shown below . The chart plots the risk and return characteristics
for a spectrum of the 100 IFA Index Portfolios (numbered) and their composite indexes (lettered) for a 50-year time period . Also shown are the indexes that IFA underweights (letters in squares) . These asset classes are underweighted because they have shown to deliver higher risk without an adequate corresponding return . For example, the U .S . Small Growth Index carried significant risk but had lower returns than the Emerging Markets Value Index . The IFA Index Portfolios are comprised of funds that enable reasonable returns for the risks involved . This is why investors should take on as much of the right risks as their risk capacity allows, rebalance and just hold on for as long as they can .
“Some investments do have higher expected returns than others . Which ones? Well, by and large they’re the ones that will do the worst in bad times .” — William F. Sharpe. Money magazine, July 2007
50 Years (1/1/1966 - 12/31/2015)
2016
U.S. Total Market*
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Step 9: HistoryHistorical Risks and Returns of Indexes
Historical stock market data provides investors with a powerful set of tools for constructing portfolios that can maximize expected returns at given levels of risk . By analyzing the historical returns for various asset classes, including stocks, bonds, private equity, real estate, and even precious metals, an investor can see the difference between compensated and uncompensated risk over time .
Most investors tend to make investment decisions based on the most recent 1, 3, and 5-year returns and assume that recent past performance will persist . But long-term data can be more valuable than short-term data .
The chart below shows the annualized returns and risk for value, blend and growth indexes around the world over various periods of time: 88 years of history for U .S . large and small capitalization stocks, 41 years of stock history for non-U .S . developed markets, and 27 years of stock history for emerging markets . The chart illustrates the impact of size and value investing across global asset classes . Across each asset class shown, small and value indexes carried increased risk and return characteristics . IFA’s Index Portfolios tilt towards small and value indexes, allowing clients to increase their expected return without increasing their overall stock to bond allocation .
“Those who are ignorant of investment history are bound to repeat it . Historical investment returns and risks of various asset classes should be studied . Investment results for an asset over a long enough period (greater than 20 years) are a good guide to the future returns and risks of that asset . Further, it should be possible to approximate the future long-term return and risk of a portfolio consisting of such assets .” — William Bernstein, The Intelligent Asset Allocator
Large, Small, Value & Growth Indexes Around the World
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Step 10: Risk CapacityAnalyze Your Five Dimensions of Risk Capacity
In order to optimize investment outcome from a risk and return perspective, it is IFA’s view that investors should take on as much risk as their risk capacity allows . Risk capacity can be regarded as a measurement of an investor’s ability to earn stock market returns . The problem is that most investors invest without a clear understanding of risk or with an improper measure of how much risk is right for them .
Through IFA’s Risk Capacity Survey at ifa .com, investors learn the amount of risk that is appropriate for them . The results of
Five Dimensions of Risk Capacity
the survey provide a personalized Risk Capacity Score, which is based on the following five dimensions for each investor: time horizon and liquidity needs, attitude toward risk, net worth, income and savings rate, and investment knowledge . This score is the primary tool IFA uses to determine the proper asset allocation for each client . A higher score suggests a capacity of tolerating high risk investing to obtain the potential for higher returns . A lower score indicates a risk aversion and the need to invest more conservatively . Each score corresponds to one of IFA’s 100 Index Portfolios .
Worth Income Knowledge
Time Attitude
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Step 11: Risk ExposureAnalyze Your Six Dimensions of Risk Exposure
To achieve optimal results, investors need to match their Risk Capacity Score with a specific risk exposure. At IFA, we call this process, “matching people with portfolios .” Many investors choose a common 60/40 (stock/bond) asset allocation, regardless of their risk capacity . A more prudent strategy is to invest in a portfolio that directly corresponds to a particular risk capacity .
IFA’s 100 Index Portfolios cover the spectrum of risk and expected return, with portfolios ranging from very high risk to very low risk . Each IFA Index Portfolio is constructed with a specific blend of asset class index funds that capture a quantifiable level of risk exposure.
This is accomplished through exposure to six dimensions of risk—dimensions which have been responsible for approximately 96% of returns .37 Based on the extensive research of Eugene Fama and Kenneth French, these dimensions are: exposure or sensitivity to the market, as a whole, the degree to which the portfolio is tilted toward size (market capitalization), value (book-to-market ratio), and direct profitability (gross profits scaled by book value) of the equity holdings, as well as exposure to term and default risk for the fixed income holdings. Each of IFA’s Index Portfolios offers a sophisticated risk-appropriate approach, capturing risk exposure in order to maximize expected returns at a given level of risk exposure .
Six Dimensions of Risk Exposure
Profitability Term Default
Market Size Value
17 IFA | 12-Step Brochure
RebalanceIFA’s clients benefit from strategies that facilitate investment success. In particular, IFA’s ongoing professional account management includes quarterly analysis for rebalancing opportunities to ensure that portfolio risk exposure remains in line with an individual’s risk capacity .
Tax Loss HarvestAn additional value added feature available to IFA’s clients is opportunistic tax loss harvesting . By selling funds that have experienced significant losses, investors can “bank” capital losses to offset future gains . Once the IRS wash sale rules have been met, the funds are repurchased . Careful consideration is given to the appropriateness of this strategy on a case-by-case basis .
Glide PathIFA’s clients may choose to take advantage of a sophisticated Glide Path feature to their portfolios, creating a “set it and forget it” approach for a successful and less stressful investment strategy . When clients choose the Glide Path option, they will automatically experience a reduction of one risk level each year, thus permitting a smooth and effortless “glide” into retirement.
Asset LocationJust as important as asset allocation is asset location . For a client who has a mixture of accounts, such as taxable, traditional IRAs and Roth IRAs, taxes can be minimized by constructing an overall portfolio that includes multiple investment vehicles located in different types of accounts. IFA evaluates each account to determine if it should be a stand-alone or part of an asset location strategy .
Retirement AnalyzerA retirement analysis utilizing Monte Carlo simulation helps clients understand key factors in retirement investing. IFA adds these significant enhancements to its suite of services in order to provide a high standard of care to clients who entrust the management of their valued assets to the firm.
Step 12: Invest and RelaxRebalance, Tax Loss Harvest, Glide Path, and Asset Locate
IFA’s 100 risk-calibrated Index Portfolios allow investors to step off the expensive and emotional roller coaster of active investing and step up to a more prudent strategy that implements the Nobel Prize-winning research referred to as Modern Portfolio Theory .
IFA’s clients enjoy the benefits of investing in risk-appropriate, style-pure index portfolios that carry more than 87 years of risk and return data . These portfolios are formulated using investment science based on economic theories and isolated risk factors that have been shown to carry higher returns over time .
In summary, clients of Index Fund Advisors are able to invest confidently and comfortably as they step off the expensive, emotional roller coaster of active investing.
18
IFA Index PortfoliosIFA offers 100 individualized, diversified Index Portfolios allocated among three broad asset classes: fixed income (bonds), U .S . stocks, and non-U .S . stocks . The stocks are further divided by size and value .
General asset allocations for 20 of these portfolios are presented below . The portfolios are labeled 5 through 100 in five-point increments. IFA Index Portfolio 5, which has the lowest expected risk and return, is tilted toward fixed income with a minor investment in stocks . Conversely, IFA Index Portfolio 100, which has the highest expected risk and return, has no fixed income and the stock indexes are tilted toward small and value companies in the U .S . and international markets .
The tables on the next two pages show the risk and return for the same 20 Index Portfolios (starting with Portfolio 100), including the highest and lowest rolling period returns for each Portfolio .
Following the Risk/Return Data are fact sheets for four IFA Index Portfolios . The data for each portfolio consists of a list of the indexes contained in the portfolios, simulated returns and volatility data, charts that represent annual returns and growth of $1, corresponding annualized returns, and a 50-year monthly rolling period analysis, which provides a simulation of passive investor experiences . After the fact sheets are the disclosures for backtested performance data and the sources and description of data used to simulate risk and return characteristics, including the mutual funds needed to implement these portfolios .
85756555453525155 95
“The best way in my view is to just buy a low-cost index fund and keep buying it regularly over time, because you’ll be buying into a wonderful industry, which in effect is all of American industry… People ought to sit back and relax and keep accumulating over time .”
-Warren Buffett, MarketWatch, May 7, 2007
19 IFA | 12-Step Brochure
IFA Index Portfolio DataRisk & Reward Table
20
IFA Index Portfolio DataHigh-Low Comparison Table
-49.
38%
-31.
37%
-5.4
4%3.
36%
%42.02%31.42
%59.23%01.73
%01.15%24.77
%72.81-%13.7
12.2
1%16
.21%
-47.
02%
-29.
58%
-4.8
4%3.
53%
%76.91%24.32
%38.13%77.53
%82.84%97.27
%99.61-%03.7
11.9
6%15
.41%
-44.
63%
-27.
80%
-4.2
6%3.
69%
%90.91%07.22
%27.03%44.43
%15.54%72.86
%47.51-%72.7
11.7
0%14
.62%
-42.
21%
-26.
02%
-3.7
1%3.
83%
%15.81%89.12
%06.92%11.33
%87.24%78.36
%05.41-%42.7
11.4
3%13
.83%
-39.
76%
-24.
25%
-3.1
9%3.
94%
%39.71%52.12
%94.82%97.13
%01.04%85.95
%92.31-%91.7
11.1
5%13
.05%
-37.
29%
-22.
49%
-2.6
9%4.
04%
%33.71%25.02
%83.72%64.03
%54.73%93.55
%01.21-%21.7
10.8
5%12
.27%
-34.
78%
-20.
73%
-2.2
1%4.
12%
%47.61%87.91
%82.62%41.92
%58.43%13.15
%49.01-%50.7
10.5
5%11
.49%
-32.
25%
-18.
97%
-1.7
5%4.
18%
%31.61%40.91
%71.52%28.72
%92.23%34.74
%87.9-%69.6
10.2
3%10
.72%
-29.
70%
-17.
22%
-1.3
2%4.
22%
%25.51%92.81
%70.42%05.62
%67.92%50.54
%56.8-%78.6
9.91
%9.
95%
-27.
11%
-15.
47%
-0.9
1%4.
25%
%19.41%55.71
%79.22%91.52
%98.72%07.24
%45.7-%17.6
9.57
%9.
20%
-24.
50%
-13.
73%
-0.5
2%4.
26%
%92.41%97.61
%78.12%78.32
%37.62%73.04
%44.6-%14.6
9.23
%8.
44%
-21.
87%
-11.
99%
-0.1
5%4.
25%
%76.31%30.61
%77.02%65.22
%65.52%80.83
%63.5-%11.6
8.87
%7.
70%
-19.
21%
-10.
25%
0.21
%4.
06%
%40.31%72.51
%86.91%52.12
%04.42%28.53
%03.4-%08.5
8.50
%6.
97%
-16.
53%
-8.5
2%0.
54%
3.81
%%04.21
%15.41%66.81
%49.91%32.32
%85.33%52.3-
%84.58.
13%
6.26
%
-13.
82%
-6.7
8%0.
86%
3.55
%%87.11
%47.31%76.71
%36.81%60.22
%73.13%12.2-
%41.57.
74%
5.57
%
-11.
08%
-5.0
5%1.
15%
3.28
%%61.11
%50.31%78.61
%23.71%98.02
%91.92%02.1-
%08.47.
35%
4.91
%
-8.3
3%-3
.32%
1.43
%3.
00%
%35.01%84.21
%13.61%26.61
%17.91%30.72
%91.0-%54.4
6.95
%4.
31%
-5.5
5%-1
.59%
1.43
%2.
70%
%98.9%98.11
%57.51%01.61
%76.81%09.42
%97.0%90.4
6.53
%3.
78%
-2.9
6%0.
01%
1.08
%2.
39%
%52.9%03.11
%81.51%75.51
%50.81%97.22
%07.0%17.3
6.11
%3.
36%
-2.4
4%0.
04%
0.72
%2.
06%
%66.8%17.01
%06.41%40.51
%34.71%89.12
%32.0%33.3
5.67
%3.
11%
-43.
32%
-26.
08%
-6.6
3%-3
.43%
%62.81%94.91
%27.92%04.33
%14.73%10.16
%90.61-%01.7
9.68
%15
.10%
21 IFA | 12-Step Brochure
IFA
Inde
x Po
rtfo
lio 1
00
Suita
ble
for i
nves
tors
who
hav
e at
leas
t 15
year
s be
fore
ne
edin
g ap
prox
imat
ely
20%
of t
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inve
stm
ents
and
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ery
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Annu
aliz
ed R
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Stan
dard
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n (%
)(A
nnua
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9,59
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7.77
54.0
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441.
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18.3
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22.3
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15.6
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18.9
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13.6
19.
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10.2
7
Ann
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etur
ns: 5
0 Ye
ars
(1/1
/196
6 - 1
2/31
/201
5)
Gro
wth
of $
1: 5
0 Ye
ars
(1/1
/196
6 - 1
2/31
/201
5) -
Log
Scal
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Sim
ulat
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Dat
a
Glo
bal
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ks
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bal
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100
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Mos
t Agg
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ates
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Dis
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: ifa
bt.c
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Ret
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net
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Pas
t per
form
ance
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s no
t gua
rant
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ture
resu
lts.
$318
1. 1
5-ye
ars
repr
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ts th
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timat
ed a
vera
ge h
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ng p
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rs w
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k C
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com
.2.
The
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ian
Annu
aliz
ed R
etur
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ange
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ian
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nd 6
mon
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lized
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nd D
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fabt
.com
. Ret
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are
net
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FA &
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. Pas
t per
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ance
doe
s no
t gua
rant
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ture
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lts.
*Per
cent
ile ra
nkin
g of
al
l the
rolli
ng p
erio
ds.
IFA
Inde
x Po
rtfo
lio 1
00Ba
sed
on 5
0 Ye
ars
of M
onth
ly D
ata:
600
Mon
ths
(Jan
uary
1, 1
966
to D
ecem
ber 3
1, 2
015)
0.08
0.25 0.5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 20 30 40 50
1 3 6 12 24 36 48 60 72 84 96 108
120
132
144
156
168
180
240
360
480
600
600
598
595
589
577
565
553
541
529
517
505
493
481
469
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433
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05-2
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69-1
2/74
1/68
-12/
743/
01-2
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-2/0
93/
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3/98
-2/0
93/
97-2
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3/96
-2/0
93/
95-2
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3/94
-2/0
93/
89-2
/09
1/86
-12/
153/
69-2
/09
1/66
-12/
15
-22.
59%
-37.
19%
-47.
73%
-49.
38%
-31.
37%
-18.
27%
-10.
39%
-5.4
4%-6
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-1.9
2%0.
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1.06
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36%
2.17
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4.34
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5.20
%7.
31%
11.0
0%10
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12.2
1%
$0.7
7$0
.63
$0.5
2$0
.51
$0.4
7$0
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$0.6
4$0
.76
$0.6
6$0
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$1.0
7$1
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$1.3
9$1
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$1.4
9$1
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$2.1
7$2
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$4.1
0$2
2.91
$61.
21$3
17.7
7
1/75
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3/09
-2/1
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84-7
/87
10/7
4-9/
788/
82-7
/87
1/75
-12/
808/
82-7
/89
1/75
-12/
821/
75-1
2/83
9/77
-8/8
71/
75-1
2/85
1/75
-12/
8610
/74-
9/87
1/75
-12/
8810
/74-
9/89
10/7
4-9/
941/
75-1
2/04
1/75
-12/
141/
66-1
2/15
22.4
3%40
.08%
61.9
0%77
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51.1
0%37
.10%
34.0
9%32
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29.7
4%27
.13%
24.7
1%25
.54%
24.1
3%24
.60%
24.7
9%25
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23.7
6%23
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20.2
4%17
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15.0
2%12
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$1.2
2$1
.40
$1.6
2$1
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$2.2
8$2
.58
$3.2
3$4
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$4.7
7$5
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$5.8
5$7
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9$1
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$14.
26$1
8.93
$19.
77$2
5.00
$39.
88$1
30.8
8$2
69.6
1$3
17.7
7
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1$3
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7$4
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$5.7
9$6
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$15.
44$5
4.44
$154
.57
$317
.77
1 2 3 4
15-Y
ear 1
Mon
thly
Rol
ling
Perio
ds: 5
0 Ye
ars
(196
6 to
201
5) T
otal
of 4
21 R
ollin
g Pe
riods
Ann
ualiz
ed R
etur
ns fo
r 15-
Year
Mon
thly
Rol
ling
Perio
ds (%
)
Rol
ling
Perio
d R
etur
n D
ata:
50
Year
s (1
966
to 2
015)
# of
R
ollin
g Pe
riods
Med
ian
Ann'
lzd
Ret
urn
(50t
h %
ile)
Ret
urn
Ran
ge(H
igh
min
us L
ow)
Low
est
Rol
ling
Perio
d D
ate
Low
est
Rol
ling
Perio
d R
etur
n
Gro
wth
of
$1
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Low
est
Perio
d
Hig
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R
ollin
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Dat
e
Hig
hest
R
ollin
g Pe
riod
Ret
urn
Gro
wth
of
$1
in
Hig
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Pe
riod
Med
ian
Gro
wth
of
$1
Per P
erio
d N
umbe
r of:
Yrs
Mon
ths
Exam
ples
of 1
5-Ye
ar M
onth
ly R
ollin
g Pe
riods
1
Sim
ulat
ed P
assi
ve In
vest
or E
xper
ienc
es (S
PIEs
)
1980
1971
1972
1973
1974
1976
1977
1978
1970
1969
1968
1967
1966
1975
1979
1981
1982
15 1
180
421
13.4
7%18
.74%
3/94
-2/0
95.
20%
$2.1
410
/74-
9/89
23.9
4%$2
5.00
$6.6
6
01
23
45
67
89
1011
1213
1415
1617
1819
2021
2223
2425
0102030405060708090100
110
120
5th*
7.96
%25
th*
10.7
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th*
13.4
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th*
17.1
6%95
th*
19.6
7%
15 Y
rsD
ec 8
0Ja
n 66
15 Y
rsJa
n 81
Feb
6615
Yrs
Feb
81M
ar 6
615
Yrs
Mar
81
Apr
66
22
IFA
Inde
x Po
rtfo
lio 7
5
Suita
ble
for i
nves
tors
who
hav
e at
leas
t 13
year
s be
fore
ne
edin
g ap
prox
imat
ely
20%
of t
heir
inve
stm
ents
and
are
w
illing
to a
ccep
t a h
ighe
r deg
ree
of v
olat
ility
in o
rder
to
achi
eve
high
er p
ortfo
lio g
row
th p
oten
tial.
Gro
wth
of $
1 ($
)
Annu
aliz
ed R
etur
n (%
)
Stan
dard
Dev
iatio
n (%
)(A
nnua
lized
Vol
atilit
y)
3,52
617
2.57
34.9
74.
471.
691.
291.
210.
941.
141.
220.
971.
03
9.73
10.8
510
.69
7.77
5.37
5.26
6.45
-6.0
914
.07
21.7
6-3
.40
2.56
16.6
912
.27
11.8
012
.70
13.9
610
.51
8.49
15.4
610
.38
7.66
9.16
7.76
Ann
ual R
etur
ns: 5
0 Ye
ars
(1/1
/196
6 - 1
2/31
/201
5)
Gro
wth
of $
1: 5
0 Ye
ars
(1/1
/196
6 - 1
2/31
/201
5) -
Log
Scal
e
Sim
ulat
ed R
etur
ns a
nd V
olat
ility
Dat
a
Glo
bal
Stoc
ks
Glo
bal
Bon
ds
75%
25%
Mod
erat
ely
Aggr
essi
ve
Sour
ces,
Upd
ates
, and
Dis
clos
ures
: ifa
bt.c
om.
Ret
urns
net
of I
FA &
DFA
fee.
Pas
t per
form
ance
doe
s no
t gua
rant
ee fu
ture
resu
lts.
$173
1. 1
3-ye
ars
repr
esen
ts th
e es
timat
ed a
vera
ge h
oldi
ng p
erio
d fo
r inv
esto
rs w
ho s
core
75
on th
e R
isk
Cap
acity
Sur
vey
at if
a.co
m.
2. T
he M
edia
n An
nual
ized
Ret
urns
, Ret
urn
Ran
ge, a
nd M
edia
n G
row
th o
f $1
show
n fo
r 1, 3
, and
6 m
onth
per
iods
are
not
ann
ualiz
ed.
Sour
ces,
Upd
ates
, and
Dis
clos
ures
: ifa
bt.c
om. R
etur
ns a
re n
et o
f IFA
& D
FA fe
es. P
ast p
erfo
rman
ce d
oes
not g
uara
ntee
futu
re re
sults
.
*Per
cent
ile ra
nkin
g of
al
l the
rolli
ng p
erio
ds.
IFA
Inde
x Po
rtfo
lio 7
5Ba
sed
on 5
0 Ye
ars
of M
onth
ly D
ata:
600
Mon
ths
(Jan
uary
1, 1
966
to D
ecem
ber 3
1, 2
015)
0.08
0.25 0.5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 20 30 40 50
1 3 6 12 24 36 48 60 72 84 96 108
120
132
144
156
168
180
240
360
480
600
600
598
595
589
577
565
553
541
529
517
505
493
481
469
457
445
433
421
361
241
121 1
1.13
%3.
38%
5.91
%13
.63%
12.7
7%11
.23%
10.6
4%11
.23%
10.9
2%10
.90%
11.2
9%11
.08%
10.7
6%11
.07%
11.1
2%11
.31%
11.5
6%11
.76%
13.1
0%12
.66%
11.9
1%10
.85%
33.4
5%54
.95%
79.8
7%92
.68%
59.9
4%42
.57%
34.5
6%30
.07%
27.0
1%22
.38%
18.5
2%18
.94%
16.4
8%17
.69%
16.9
0%16
.60%
14.2
0%14
.85%
10.2
1%5.
50%
2.87
%0.
00%
10/8
7-10
/87
9/08
-11/
089/
08-2
/09
3/08
-2/0
93/
07-2
/09
3/06
-2/0
93/
05-2
/09
3/04
-2/0
91/
69-1
2/74
1/68
-12/
743/
01-2
/09
3/00
-2/0
93/
99-2
/09
3/98
-2/0
93/
97-2
/09
3/96
-2/0
93/
95-2
/09
3/94
-2/0
93/
89-2
/09
1/86
-12/
153/
69-2
/09
1/66
-12/
15
-16.
42%
-26.
53%
-35.
83%
-37.
29%
-22.
49%
-12.
10%
-6.2
3%-2
.69%
-3.2
5%0.
40%
2.18
%2.
35%
4.04
%3.
12%
4.06
%4.
79%
5.84
%5.
39%
7.12
%9.
61%
10.0
7%10
.85%
$0.8
4$0
.73
$0.6
4$0
.63
$0.6
0$0
.68
$0.7
7$0
.87
$0.8
2$1
.03
$1.1
9$1
.23
$1.4
9$1
.40
$1.6
1$1
.84
$2.2
1$2
.20
$3.9
6$1
5.71
$46.
41$1
72.5
7
1/75
-1/7
53/
09-5
/09
3/09
-8/0
93/
09-2
/10
3/09
-2/1
18/
84-7
/87
7/82
-6/8
68/
82-7
/87
1/75
-12/
808/
82-7
/89
1/75
-12/
821/
75-1
2/83
9/77
-8/8
71/
75-1
2/85
1/75
-12/
8610
/74-
9/87
1/75
-12/
8810
/74-
9/89
10/7
4-9/
941/
75-1
2/04
1/75
-12/
141/
66-1
2/15
17.0
3%28
.42%
44.0
4%55
.39%
37.4
5%30
.46%
28.3
3%27
.38%
23.7
6%22
.79%
20.7
0%21
.29%
20.5
2%20
.81%
20.9
6%21
.38%
20.0
4%20
.24%
17.3
3%15
.12%
12.9
4%10
.85%
$1.1
7$1
.28
$1.4
4$1
.55
$1.8
9$2
.22
$2.7
1$3
.35
$3.5
9$4
.21
$4.5
1$5
.68
$6.4
6$8
.00
$9.8
1$1
2.42
$12.
90$1
5.88
$24.
46$6
8.28
$130
.08
$172
.57
$1.0
1$1
.03
$1.0
6$1
.14
$1.2
7$1
.38
$1.5
0$1
.70
$1.8
6$2
.06
$2.3
5$2
.57
$2.7
8$3
.17
$3.5
4$4
.03
$4.6
2$5
.30
$11.
72$3
5.73
$90.
20$1
72.5
7
1 2 3 4
13-Y
ear 1
Mon
thly
Rol
ling
Perio
ds: 5
0 Ye
ars
(196
6 to
201
5) T
otal
of 4
45 R
ollin
g Pe
riods
Ann
ualiz
ed R
etur
ns fo
r 13-
Year
Mon
thly
Rol
ling
Perio
ds (%
)
Rol
ling
Perio
d R
etur
n D
ata:
50
Year
s (1
966
to 2
015)
# of
R
ollin
g Pe
riods
Med
ian
Ann'
lzd
Ret
urn
(50t
h %
ile)
Ret
urn
Ran
ge(H
igh
min
us L
ow)
Low
est
Rol
ling
Perio
d D
ate
Low
est
Rol
ling
Perio
d R
etur
n
Gro
wth
of
$1
in
Low
est
Perio
d
Hig
hest
R
ollin
g Pe
riod
Dat
e
Hig
hest
R
ollin
g Pe
riod
Ret
urn
Gro
wth
of
$1
in
Hig
hest
Pe
riod
Med
ian
Gro
wth
of
$1
Per P
erio
d N
umbe
r of:
Yrs
Mon
ths
Exam
ples
of 1
3-Ye
ar M
onth
ly R
ollin
g Pe
riods
1
Sim
ulat
ed P
assi
ve In
vest
or E
xper
ienc
es (S
PIEs
)
1980
1971
1972
1973
1974
1976
1977
1978
1970
1969
1968
1967
1966
1975
1979
1981
1982
13 1
156
445
11.3
1%16
.60%
3/96
-2/0
94.
79%
$1.8
410
/74-
9/87
21.3
8%$1
2.42
$4.0
3
13 Y
rsD
ec 7
8Ja
n 66
13 Y
rsJa
n 79
Feb
6613
Yrs
Feb
79M
ar 6
613
Yrs
Mar
79
Apr
66
01
23
45
67
89
1011
1213
1415
1617
1819
2021
2223
2425
0102030405060708090100
110
120
5th*
7.27
%25
th*
9.36
%50
th*
11.3
1%75
th*
15.1
9%95
th*
18.6
1%
23 IFA | 12-Step Brochure
IFA
Inde
x Po
rtfo
lio 5
0
Suita
ble
for i
nves
tors
who
hav
e 8
year
s be
fore
nee
ding
ap
prox
imat
ely
20%
of t
heir
inve
stm
ents
and
are
willi
ng to
ac
cept
a m
oder
ate
degr
ee o
f vol
atilit
y in
ord
er to
ach
ieve
m
oder
ate
portf
olio
gro
wth
.
Gro
wth
of $
1 ($
)
Annu
aliz
ed R
etur
n (%
)
Stan
dard
Dev
iatio
n (%
)(A
nnua
lized
Vol
atilit
y)
916.
0682
.45
21.0
23.
471.
551.
201.
140.
961.
101.
140.
981.
02
8.06
9.23
9.09
6.41
4.51
3.75
4.33
-3.5
99.
7714
.20
-2.3
11.
80
11.2
88.
448.
038.
369.
177.
005.
7410
.05
7.05
5.46
5.94
5.25
Ann
ual R
etur
ns: 5
0 Ye
ars
(1/1
/196
6 - 1
2/31
/201
5)
Gro
wth
of $
1: 5
0 Ye
ars
(1/1
/196
6 - 1
2/31
/201
5) -
Log
Scal
e
Sim
ulat
ed R
etur
ns a
nd V
olat
ility
Dat
a
Glo
bal
Stoc
ks
Glo
bal
Bon
ds
50%
50%
Mod
erat
e
Sour
ces,
Upd
ates
, and
Dis
clos
ures
: ifa
bt.c
om.
Ret
urns
net
of I
FA &
DFA
fee.
Pas
t per
form
ance
doe
s no
t gua
rant
ee fu
ture
resu
lts.
$82
1. 8
-yea
rs re
pres
ents
the
estim
ated
ave
rage
hol
ding
per
iod
for i
nves
tors
who
sco
re 5
0 on
the
Ris
k C
apac
ity S
urve
y at
ifa.
com
.2.
The
Med
ian
Annu
aliz
ed R
etur
ns, R
etur
n R
ange
, and
Med
ian
Gro
wth
of $
1 sh
own
for 1
, 3, a
nd 6
mon
th p
erio
ds a
re n
ot a
nnua
lized
.So
urce
s, U
pdat
es, a
nd D
iscl
osur
es: i
fabt
.com
. Ret
urns
are
net
of I
FA &
DFA
fees
. Pas
t per
form
ance
doe
s no
t gua
rant
ee fu
ture
resu
lts.
*Per
cent
ile ra
nkin
g of
al
l the
rolli
ng p
erio
ds.
IFA
Inde
x Po
rtfo
lio 5
0Ba
sed
on 5
0 Ye
ars
of M
onth
ly D
ata:
600
Mon
ths
(Jan
uary
1, 1
966
to D
ecem
ber 3
1, 2
015)
0.08
0.25 0.5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 20 30 40 50
1 3 6 12 24 36 48 60 72 84 96 108
120
132
144
156
168
180
240
360
480
600
600
598
595
589
577
565
553
541
529
517
505
493
481
469
457
445
433
421
361
241
121 1
0.89
%2.
73%
4.85
%10
.82%
10.3
0%9.
60%
9.22
%9.
39%
9.20
%9.
08%
9.34
%9.
41%
9.28
%9.
39%
9.44
%9.
56%
9.80
%10
.14%
11.4
0%10
.92%
10.1
2%9.
23%
22.6
9%35
.55%
51.7
2%64
.88%
40.4
6%30
.31%
25.9
9%22
.39%
19.6
7%16
.69%
14.4
6%13
.80%
12.5
4%13
.25%
12.7
5%12
.38%
10.7
4%11
.18%
7.88
%4.
47%
1.83
%0.
00%
10/8
7-10
/87
9/08
-11/
089/
08-2
/09
3/08
-2/0
93/
07-2
/09
3/06
-2/0
93/
05-2
/09
3/04
-2/0
912
/68-
11/7
41/
68-1
2/74
3/01
-2/0
93/
00-2
/09
3/99
-2/0
93/
98-2
/09
3/97
-2/0
93/
96-2
/09
10/9
7-9/
113/
94-2
/09
1/96
-12/
151/
86-1
2/15
3/69
-2/0
91/
66-1
2/15
-11.
07%
-16.
52%
-23.
43%
-24.
50%
-13.
73%
-6.4
4%-2
.64%
-0.5
2%-0
.07%
2.38
%2.
99%
3.16
%4.
26%
3.66
%4.
32%
4.87
%5.
49%
5.25
%6.
41%
7.99
%9.
03%
9.23
%
$0.8
9$0
.83
$0.7
7$0
.75
$0.7
4$0
.82
$0.9
0$0
.97
$1.0
0$1
.18
$1.2
7$1
.32
$1.5
2$1
.48
$1.6
6$1
.85
$2.1
1$2
.15
$3.4
7$1
0.05
$31.
70$8
2.45
1/75
-1/7
51/
75-3
/75
3/09
-8/0
97/
82-6
/83
7/84
-6/8
68/
84-7
/87
7/82
-6/8
68/
82-7
/87
10/8
1-9/
874/
80-3
/87
10/8
1-9/
891/
75-1
2/83
9/77
-8/8
71/
75-1
2/85
9/74
-8/8
610
/74-
9/87
1/75
-12/
8810
/74-
9/89
10/7
4-9/
941/
75-1
2/04
12/6
6-11
/06
1/66
-12/
15
11.6
2%19
.03%
28.2
9%40
.37%
26.7
3%23
.87%
23.3
5%21
.87%
19.6
0%19
.06%
17.4
5%16
.95%
16.7
9%16
.91%
17.0
6%17
.25%
16.2
3%16
.43%
14.2
9%12
.46%
10.8
5%9.
23%
$1.1
2$1
.19
$1.2
8$1
.40
$1.6
1$1
.90
$2.3
2$2
.69
$2.9
3$3
.39
$3.6
2$4
.09
$4.7
2$5
.58
$6.6
2$7
.92
$8.2
1$9
.79
$14.
46$3
3.92
$61.
64$8
2.45
$1.0
1$1
.03
$1.0
5$1
.11
$1.2
2$1
.32
$1.4
2$1
.57
$1.7
0$1
.84
$2.0
4$2
.25
$2.4
3$2
.68
$2.9
5$3
.28
$3.7
0$4
.26
$8.6
6$2
2.40
$47.
32$8
2.45
1 2 3 4
8-Ye
ar 1 M
onth
ly R
ollin
g Pe
riods
: 50
Year
s (1
966
to 2
015)
Tot
al o
f 505
Rol
ling
Perio
ds
Ann
ualiz
ed R
etur
ns fo
r 8-Y
ear M
onth
ly R
ollin
g Pe
riods
(%)
Rol
ling
Perio
d R
etur
n D
ata:
50
Year
s (1
966
to 2
015)
# of
R
ollin
g Pe
riods
Med
ian
Ann'
lzd
Ret
urn
(50t
h %
ile)
Ret
urn
Ran
ge(H
igh
min
us L
ow)
Low
est
Rol
ling
Perio
d D
ate
Low
est
Rol
ling
Perio
d R
etur
n
Gro
wth
of
$1
in
Low
est
Perio
d
Hig
hest
R
ollin
g Pe
riod
Dat
e
Hig
hest
R
ollin
g Pe
riod
Ret
urn
Gro
wth
of
$1
in
Hig
hest
Pe
riod
Med
ian
Gro
wth
of
$1
Per P
erio
d N
umbe
r of:
Yrs
Mon
ths
Exam
ples
of 8
-Yea
r Mon
thly
Rol
ling
Perio
ds1
Sim
ulat
ed P
assi
ve In
vest
or E
xper
ienc
es (S
PIEs
)
1980
1971
1972
1973
1974
1976
1977
1978
1970
1969
1968
1967
1966
1975
1979
1981
1982
8 196
505
9.34
%14
.46%
3/01
-2/0
92.
99%
$1.2
710
/81-
9/89
17.4
5%$3
.62
$2.0
4
01
23
45
67
89
1011
1213
1415
1617
1819
2021
2223
2425
0102030405060708090100
110
120
5th*
4.85
%25
th*
6.98
%50
th*
9.34
%75
th*
12.9
8%95
th*
16.3
0%
8 Yr
sD
ec 7
3Ja
n 66
8 Yr
sJa
n 74
Feb
668
Yrs
Feb
74M
ar 6
68
Yrs
Mar
74
Apr
66
24
IFA
Inde
x Po
rtfo
lio 2
5
Suita
ble
for i
nves
tors
who
hav
e 5
year
s be
fore
nee
ding
ap
prox
imat
ely
20%
of t
heir
inve
stm
ents
and
are
willi
ng to
ac
cept
a c
onse
rvat
ive
degr
ee o
f ris
k fo
r inc
rem
enta
l ap
prec
iatio
n w
ith e
mph
asis
on
capi
tal p
rese
rvat
ion.
Gro
wth
of $
1 ($
)
Annu
aliz
ed R
etur
n (%
)
Stan
dard
Dev
iatio
n (%
)(A
nnua
lized
Vol
atilit
y)
169.
1634
.68
11.7
52.
551.
381.
111.
060.
991.
051.
070.
991.
01
6.00
7.35
7.29
4.80
3.28
2.12
2.10
-1.0
95.
476.
65-1
.22
1.04
6.10
4.91
4.50
4.20
4.58
3.56
3.00
4.96
3.62
3.19
2.83
2.75
Ann
ual R
etur
ns: 5
0 Ye
ars
(1/1
/196
6 - 1
2/31
/201
5)
Gro
wth
of $
1: 5
0 Ye
ars
(1/1
/196
6 - 1
2/31
/201
5) -
Log
Scal
e
Sim
ulat
ed R
etur
ns a
nd V
olat
ility
Dat
a
Glo
bal
Stoc
ks
Glo
bal
Bon
ds
25%
75%
Con
serv
ativ
e
Sour
ces,
Upd
ates
, and
Dis
clos
ures
: ifa
bt.c
om.
Ret
urns
net
of I
FA &
DFA
fee.
Pas
t per
form
ance
doe
s no
t gua
rant
ee fu
ture
resu
lts.
$35
1. 5
-yea
rs re
pres
ents
the
estim
ated
ave
rage
hol
ding
per
iod
for i
nves
tors
who
sco
re 2
5 on
the
Ris
k C
apac
ity S
urve
y at
ifa.
com
.2.
The
Med
ian
Annu
aliz
ed R
etur
ns, R
etur
n R
ange
, and
Med
ian
Gro
wth
of $
1 sh
own
for 1
, 3, a
nd 6
mon
th p
erio
ds a
re n
ot a
nnua
lized
.So
urce
s, U
pdat
es, a
nd D
iscl
osur
es: i
fabt
.com
. Ret
urns
are
net
of I
FA &
DFA
fees
. Pas
t per
form
ance
doe
s no
t gua
rant
ee fu
ture
resu
lts.
*Per
cent
ile ra
nkin
g of
al
l the
rolli
ng p
erio
ds.
IFA
Inde
x Po
rtfo
lio 2
5Ba
sed
on 5
0 Ye
ars
of M
onth
ly D
ata:
600
Mon
ths
(Jan
uary
1, 1
966
to D
ecem
ber 3
1, 2
015)
0.08
0.25 0.5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 20 30 40 50
1 3 6 12 24 36 48 60 72 84 96 108
120
132
144
156
168
180
240
360
480
600
600
598
595
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i IFA | 12-Step Brochure
DisclosuresDisclosure for Backtested Performance Information, the IFA Indexes, and IFA Index Portfolios (updates can be found at www.ifabt.com):
1. Index Fund Advisors, Inc. (IFA) is an SEC registered Investment Adviser. Information pertaining to IFA’s advisory operations, services, and fees is set forth in IFAs’ current Form ADV Part 2 (Brochure), a copy of which is available upon request and at www.adviserinfo.sec.gov. The performance information presented in certain charts or tables represent backtested performance based on combined simulated index data and live (or actual) mutual fund results from January 1, 1928 to the period ending date shown, using the strategy of buy and hold and on the first of each year annually rebalancing the globally diversified portfolios of index funds. Backtested performance is hypothetical (it does not reflect trading in actual accounts) and is provided for informational purposes only to indicate historical performance had the index portfolios been available over the relevant time period. IFA refers to this hypothetical data as a Simulated Passive Investor Experience (SPIE). IFA did not offer the index portfolios until November 1999. Prior to 1999, IFA did not manage client assets. The IFA indexing investment strategy is based on principles generally known as Modern Portfolio Theory and the Fama and French Three Factor Model for Equities and Two Factor Model for Fixed Income. Index portfolios are designed to provide substantial global diversification in order to reduce investment concentration and the resulting potential increased risk caused by the volatility of individual companies, indexes, or asset classes.
2. A review of the IFA Index Data Sources (ifaindexes.com), IFA Indexes Time Series Construction (http://www.ifa.com/disclosures/charts/#timeseries) and several of the Dimensional Indexes (http://www.ifa.com/disclosures/charts/#dfafunds) is an integral part of this disclosure and should be read in conjunction with this explanation of backtested performance information presented. IFA defines index funds as mutual funds that follow a set of rules of ownership that are held constant regardless of market conditions. An important characteristic of an index fund is that its rules of ownership are not based on a forecast of short-term events. Therefore, an investment strategy that is limited to the buying and rebalancing of a portfolio of index funds is often referred to as passive investing, as opposed to active investing. Simulated index data is based on the performance of indexes and live mutual funds as described in the IFA Indexes Data Sources page. The index mutual funds used in IFA’s Index Portfolios are IFA’s best estimate of a mutual fund that will come closest to the index data provided in the simulated indexes. Simulated index data is used for the period prior to the inception of the relevant live mutual fund data and an equivalent mutual fund expense ratio is deducted from simulated index data. Live (or actual) mutual fund performance is used after the inception date of each mutual fund. The IFA Indexes Times Series Construction goes back to January 1928 and consistently reflects a tilt towards small cap and value equities over time, with an increasing diversification to international markets, emerging markets and real estate investment trusts as data became available. As of January 1928, there are 4 equity indexes and 2 bond indexes; in January 1970 there are a total of 8 indexes, and there are 15 indexes in March 1998 to present. See (http://www.ifa.com/disclosures/charts/#IFA_evolution) to see the analysis of the evolution of these portfolios. This names the indexes used in the IFA Portfolios for each period, and shows the Time Series Construction of the IFA indexes. If the original 4 equity indexes from 1928 (IFA US Large Company Index; IFA US Large Cap Value Index; IFA US Small Cap Index; IFA US Small Cap Value Index) are held constant until December 2012, the annualized rate of return of this simplified version of IFA Index Portfolio 100 is 10.67%, after the deduction of a 0.9% IFA advisory fee and a standard deviation of 23.59%. The evolving IFA Indexes over the same period have a 10.99% annualized return for IFA Index Portfolio 100 after the same IFA advisory fees and a standard deviation of 22.66%. The stitching together of index and live fund data and adding international markets, emerging markets and REITs only had a slight impact on risk and return over this 85 year period. Instead, it demonstrates the value of a small cap and value tilt in global equity markets, since over the same period a Simulated S&P 500 Index only had a return of 9.53% (with no fees deducted), at a standard deviation of 19.19%. Backtested performance is calculated by using a computer program and monthly returns data set that start with the first day of the given time period and evaluates the returns of simulated indexes and DFA index mutual funds. In 1999, tax-managed funds became available for many different DFA index funds.
3. Backtested performance does not represent actual performance and
should not be interpreted as an indication of such performance. Actual performance for client accounts may be materially lower than that of the index portfolios. Backtested performance results have certain inherent limitations. Such results do not represent the impact that material economic and market factors might have on an investment adviser’s decision-making process if the adviser were actually managing client money. Backtested performance also differs from actual performance because it is achieved through the retroactive application of model portfolios (in this case, IFA’s Index Portfolios) designed with the benefit of hindsight. As a result, the models theoretically may be changed from time to time and the effect on performance results could be either favorable or unfavorable.
4. History of Changes to the IFA Indexes: 1991-2000: IFA Index Portfolios 10, 30, 50, 70 and 90 were originally suggested by Dimensional Fund Advisors (ifa.com/pdf/balancedstrategies.pdf), merely as an example of globally diversified investments using their custom index mutual funds, back in 1991 with moderate modifications in 1996 to reflect the availability of index funds that tracked the emerging markets asset class. Index Portfolios between each of the above listed portfolios were created by IFA in 2000 by interpolating between the above portfolios. Portfolios 5, 95 and 100 were created by Index Fund Advisors in 2000, as a lower and higher extension of the DFA 1991 risk and return line. As of March 1, 2010, 100 IFA Index Portfolios are available to IFA clients, with IFA Index Portfolios between the shown allocations being interpolations of the 20 allocations shown. In January 2008, IFA introduced three new indexes and eighteen socially responsible portfolios constructed from these three indexes and five pre-existing IFA indexes. The new indexes introduced were: IFA US Social Core 2 Equity, IFA Emerging Markets Social Core, and IFA International Real Estate. All three use live DFA fund data as long as it has been available. Prior to live fund data, they use index data supplied by DFA modified for fund management fees. In April 2008, IFA introduced two new indexes and eighteen sustainability portfolios constructed from these two indexes and five pre-existing indexes. The new indexes introduced were: IFA US Sustainability Core 1 Equity and IFA International Sustainability Core Equity. In November 2011, IFA made a change to the index data used in its large growth and small growth indexes. Fama/French data was replaced with data supplied by Dimensional Fund Advisors via its Returns 2.2 program. For large growth, the difference in annualized return was about 1% (a decrease). For small growth, the difference was about 0.2%. In November 2012, IFA changed the allocations and the historical returns for its socially responsible portfolios to reflect the introduction of the DFA International Social Core Equity Portfolio (DSCLX). Prior to this, the international developed equity asset class was unavailable in a socially responsible implementation. Although clients who were invested in the old allocation from the time it became available (January 2008) likely did better than they would have done with the new allocation, the difference is not statistically significant, and it is IFA’s advice that going forward having an exposure to international developed equities will provide a substantial diversification benefit to socially responsible investors. As of September 2013, all new clients will be placed into the NEW IFA Index Portfolios, and all existing clients will be given the option to transition to the new portfolios. Index Portfolio 100 was held the same as it has been since 2000 and became the only 100 percent equity portfolio in the NEW Index Portfolios. The four fixed income indexes (25% each) remain the same as they have been since 2000 and will make up the fixed income allocation of all IFA index portfolios in the allocation equal to 100-New IP#. As of June 2015, IFA introduced Profitability into the historical back-tested returns of the equity funds. IFA wanted to incorporate the new research completed by Fama/French that introduced profitability as its fourth factor in their asset pricing model. Profitability was back-tested by DFA back to 1975. As of 2015, NEW IFA Index Portfolios are referred to as IFA Index Portfolios. The previous allocations are now referred to as Original IFA Index Portfolios. Go to www.ifa.com/btp/historyofchange.html to see a summary of changes made to the IFA Indexes and Index Portfolios.
5. Backtested performance results assume the reinvestment of dividends and capital gains and annual rebalancing at the beginning of each year. It is important to understand that the assumption of annual rebalancing has an impact on the monthly returns reported for the IFA Index Portfolio in both the Risk and Reward Table (www.ifabigtable.com) and the Index Calculator (www.ifacalc.com). For monthly rebalancing, the monthly return is calculated with the assumption that the portfolio is perfectly in balance at the beginning of each month. For annual rebalancing, the year-to-date return is calculated with the assumption that the portfolio is perfectly in
ii
balance at the beginning of the year. The latter assumption underlies the returns shown for the IFA Index Portfolios. In actual portfolios, however, rebalancing occurs at no set time, and such actions are dependent on both market conditions and individual client liquidity inflows and outflows, along with the cost impact of such transactions on the overall portfolio. Therefore actual monthly and year-to-date returns will differ from the IFA Returns Calculator. The reason for this difference is that with annual rebalancing, the monthly returns are calculated from the ratio of the year-to-date growth of $1.00 at the end of the month to the year-to-date growth of $1.00 at the beginning of the month. For monthly rebalancing, the monthly return is calculated with the assumption that the portfolio is perfectly in balance at the beginning of the month. The performance of the IFA Index Portfolios reflects and is net of the effect of IFA’s annual investment management fee of 0.9%, billed monthly, unless stated otherwise. Monthly fee deduction is a requirement of our software used for backtesting. Actual IFA advisory fees are deducted quarterly, in advance. This fee is the highest fee IFA charges. Depending on the amount of your assets under management, your investment management fee may be less. Backtested risk and return data is a combination of live (or actual) mutual fund results and simulated index data, and mutual fund fees and expenses have been deducted from both the live (or actual) results and the simulated index data. When IFA Indexes are shown in IFA Index Portfolios, all returns data reflects a deduction of 0.9% annual investment advisory fee, which is the maximum IFA fee. Unless indicated otherwise, data shown for each individual IFA Index is shown without a deduction of the IFA advisory fee. We choose this method because the creation, choice, monitoring and rebalancing of diversified index portfolios are the services of the independent investment advisor and at that point the fees are appropriate to deduct from the whole portfolio returns. Since we accept no fees from investment product firms, IFA compares index funds based on net asset value returns, which are net of the mutual fund company expense ratios only. Although index mutual funds minimize tax liabilities from short and long-term capital gains, any resulting tax liability is not deducted from performance results. Performance results also do not reflect transaction fees (as seen at www.ifafee.com) and other expenses, which reduce returns.
6. For all data periods, annualized standard deviation is presented as an approximation by multiplying the monthly standard deviation number by the square root of 12. Please note that the number computed from annual data may differ materially from this estimate. We have chosen this methodology because Morningstar uses the same method. Go to www.ifabt.com for details. In those charts and tables where the standard deviation of daily returns is shown, it is estimated as the standard deviation of monthly returns divided by the square root of 22.
7. The tax-managed index funds are not used in calculating the backtested performance of the index portfolios, unless specified in the table or chart.
8. Performance results for clients that invested in accordance with the IFA Index Portfolios will vary from the backtested performance due to market conditions and other factors, including investments cash flows, mutual fund allocations, frequency and precision of rebalancing, tax-management strategies, cash balances, lower than 0.9% advisory fees, varying custodian fees, and/or the timing of fee deductions. As the result of these and potentially other variances, actual performance for client accounts may differ materially from (and may be lower than) that of the index portfolios. Clients should consult their account statements for information about how their actual performance compares to that of the index portfolios.
9. As with any investment strategy, there is potential for profit as well as the possibility of loss. IFA does not guarantee any minimum level of investment performance or the success of any index portfolio or investment strategy. All investments involve risk and investment recommendations will not always be profitable.
10. Past performance does not guarantee future results.
11. IFA Index Portfolio Value Data is based on a starting value of one, as of January 1, 1928.
12. DISCLAIMER: THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION PROVIDED HEREIN OR ON
THE MATERIAL PROVIDED. This document does not constitute a complete description of our investment services and is for informational purposes only. It is in no way a solicitation or an offer to sell securities or investment advisory services. Any statements regarding market or other financial information is obtained from sources which we and our suppliers believe to be reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Neither our information providers nor we shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness of, or for any delay or interruption in the transmission thereof to the user. All investments involve risk, including foreign currency exchange rates, political risks, market risk, different methods of accounting and financial reporting, and foreign taxes. Your use of these materials, including www.ifa.com website is your acknowledgement that you have read and understood the full disclaimer as stated above. IFA Index Portfolios, times series, standard deviations, and returns calculations are determined in the Dimensional Returns 2.0 program. © Copyright 1999-2016, DFA, Inc.
13. IFA licenses the use of data, in part, from Morningstar Direct, a third-party provider of stock market data. Where data is cited from Morningstar Direct, the following disclosures apply: ©2016 Morningstar, Inc. All rights reserved. The information provided by Morningstar Direct and contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Updated 1-13-2016. For additional updates see www.ifabt.com.
14. Effective July 1, 2013, Index Funds Advisors, Inc., a California Corporation, is now Index Fund Advisors, Inc. a Delaware corporation.
Other Information IFA Considers to be Helpful
It is IFA’s advice that the value of having a longer time series exceeds the concerns of index substitutions over the 1928 to present period. Due to the very high standard deviations of returns (21.99%) a 40 year or more sample size of data is recommended to obtain a T-statistic of 2, that allows a conclusion at a 95% or higher level of certainty. In other words, in IFA’s opinion, smaller sample sizes introduce larger errors than the errors introduced by stitching together indexes and live data over time. This is the advice IFA provides to its clients.
Client portfolios are monitored and rebalanced, taking into consideration risk exposure consistency, transaction costs, and tax ramifications to maintain target asset allocations as shown in the Index Portfolios.
IFA uses tax-managed funds in taxable accounts. The tax-managed funds are consistent with the indexing strategy, however, they should not be expected to track the performance of corresponding non-tax-managed funds in the same or similar indexes. As such, the performance of portfolios using tax-managed funds will vary from portfolios that do not utilize these funds.
Clients’ accounts will be rebalanced depending on the fluctuation of the asset classes and the cash flow activity of the client. It is IFA’s opinion that the assumption of first of the year annual rebalancing is a reasonable approximation to reality.
IFA is not paid any brokerage commissions, sales loads, 12b1 fees, or any form of compensation from any mutual fund company or broker dealer. The only source of compensation from client investments is obtained from asset based advisory fees paid by the client. More information about advisory fees, expenses, no-load mutual fund fees, prospectuses for no-load index mutual funds, brokerage and custodian fees can be found at www.ifa.com/admin/fees.asp. Not all IFA clients follow our recommendations, and depending on unique and changing client and market situations, we may customize the construction and implementation of the index portfolios for particular clients, including the use of tax-managed mutual funds, tax-loss-harvesting techniques and rebalancing frequency and precision. In taxable accounts, IFA uses tax-managed index funds to manage client assets.
iii
Sources and Description of Data
January 1928 – December 1990: Dimensional US Large Cap Index minus 0.0083%/mo (mutual fund exp ratio)January 1991 – April 2010: DFA US Large Company Symbol: DFLCXMay 2010 – Present : DFA US Large Company Portfolio Symbol: DFUSX
Time-SeriesConstruction
Investment Objective of DFA US Large Company Portfolio (DFUSX) The U.S. Large Company Portfolio seeks, as its investment objective, to approximate the total investment return of the S&P 500® Index.
One Year Three Years Five Years Ten Years Number of HoldingsWeighted Average Market Cap
Aggregated Price-to-Book
Turnover Ratio (as of 10/31/14)Wtd. Avg Dividend-to-Price
Expense Ratio (as of 10/31/14)
503$139,086M2.40
3.00%2.29%0.08%
1.38% 15.06% 12.49% 7.31%DFA US Large Company Portfolio 1.38% 15.13% 12.57% 7.31%S&P 500 Index
Average Annual Total Return
^All Data as of Dec 31, 2015. Returns include the impact of reinvested dividends and capital gains distributions. For updates see www.ifaindexes.com.
January 1928 – February 1993: Dimensional US Large Cap Value Index minus 0.0233%/mo (mutual fund exp ratio)March 1993 – Present: DFA US Large Cap Value Portfolio Symbol: DFLVX
Time-SeriesConstruction
Investment Objective of DFA US Large Cap Value Portfolio I (DFLVX) is to achieve long-term capital appreciation. The Portfolio is a feeder portfolio and pursues its objective by investing substantially all of its assets in its corresponding Master Fund, The U.S. Large Cap Value Series, which has the same investment objective and policies as the U.S. Large Cap Value Portfolio.
One Year Three Years Five Years Ten Years Number of HoldingsWeighted Average Market Cap
Aggregated Price-to-Book
Turnover Ratio (as of 10/31/14)Wtd. Avg Dividend-to-Price
Expense Ratio (as of 10/31/14)
306$88,817M1.41
15.00%2.48%0.27%
-3.49% 14.23% 12.00% 6.67%DFA US Large Cap Value Portfolio (I) -3.83% 13.08% 11.27% 6.16%Russell 1000 Value Index
Average Annual Total Return
^All Data as of Dec 31, 2015. Returns include the impact of reinvested dividends and capital gains distributions. For updates see www.ifaindexes.com.
January 1928 – March 1992: Dimensional US Small Cap Index minus 0.0308%/mo (mutual fund exp ratio)April 1992 – Present : DFA US Small Cap Portfolio Symbol: DFSTX
Time-SeriesConstruction
Investment Objective of DFA US Small Cap Portfolio I (DFSTX) is to achieve long-term capital appreciation.
One Year Three Years Five Years Ten Years Number of HoldingsWeighted Average Market Cap
Aggregated Price-to-Book
Turnover Ratio (as of 10/31/14)Wtd. Avg Dividend-to-Price
Expense Ratio (as of 10/31/14)
2,027$1,974M1.80
9.00%1.43%0.37%
-3.29% 12.83% 10.49% 7.82%DFA US Small Cap Portfolio (I) -4.41% 11.65% 9.19% 6.80%Russell 2000 Index
Average Annual Total Return
^All Data as of Dec 31, 2015. Returns include the impact of reinvested dividends and capital gains distributions. For updates see www.ifaindexes.com.
Jan 1928 - Dec 1981: Dimensional US Micro Cap Index minus 0.0433%/mo (mutual fund exp ratio)Jan 1982 - Present: DFA US Micro Cap Portfolio: DFSCX
Time-SeriesConstruction
Investment Objective of DFA US Micro Cap Portfolio I (DFSCX) is to achieve long-term capital appreciation.
One Year Three Years Five Years Ten Years Number of HoldingsWeighted Average Market Cap
Aggregated Price-to-Book
Turnover Ratio (as of 10/31/14)Wtd. Avg Dividend-to-Price
Expense Ratio (as of 10/31/14)
1,629$1,008M1.76
12.00%1.26%0.52%
-3.62% 12.90% 10.48% 6.79%DFA US Micro Cap Portfolio -4.41% 11.65% 9.19% 6.80%Russell 2000 Index
Average Annual Total Return
^All Data as of Dec 31, 2015. Returns include the impact of reinvested dividends and capital gains distributions. For updates see www.ifaindexes.com.
January 1928 – Febuary 2000: Dimensional US Targeted Value Index minus 0.0317%/mo (mutual fund exp ratio) March 2000 – Present: DFA US Targeted Value Portfolio Symbol: DFFVX
Time-SeriesConstruction
Investment Objective of DFA Targeted Value Portfolio I (DFFVX) is to achieve long-term capital appreciation.
One Year Three Years Five Years Ten Years Number of HoldingsWeighted Average Market Cap
Aggregated Price-to-Book
Turnover Ratio (as of 10/31/14)Wtd. Avg Dividend-to-Price
Expense Ratio (as of 10/31/14)
1,537$2,896M1.21
10.00%1.63%0.37%
-5.72% 11.55% 9.17% 6.74%DFA US Targeted Value Portfolio (I) -7.47% 9.06% 7.67% 5.57%Russell 2000 Value Index
Average Annual Total Return
^All Data as of Dec 31, 2015. Returns include the impact of reinvested dividends and capital gains distributions. For updates see www.ifaindexes.com.
Sources and Description of Data: The following descriptions of IFA Indexes indicate how indexes are strung together to simulate similar risk and return characteristics back to 1928. This long-term data reduces the possible errors of interpreting a short-term return as being representative of other short-term returns. Such errors are especially high for periods of 20 years or less. When IFA Indexes are shown in Index Portfolios, all return data reflects a deduction of 0.9% annual investment advisory fee, which is the maximum advisory fee charged by IFA. Unless indicated otherwise, data shown for each individual IFA Index is shown without a deduction of the IFA advisory fee. This method is used because the
creation, choice, monitoring and rebalancing of diversified index portfolios are the services of the independent investment advisor. Therefore, fees are deducted from the whole portfolio data but not the individual index data. Live Dimensional Fund Advisors’ (DFA) fund data reflects the deduction of mutual fund advisory fees, brokerage fees, other expenses incurred by the mutual funds, incorporates actual trading results, and is sourced from DFA. Simulated index data also reflects DFA’s current mutual fund expense ratios for the entire period. Both simulated and live data reflect total returns, including dividends, except for IFA/NSDQ Index. For updates on sources and descriptions of data see www.ifaindexes.com.
January 1928 – December 1977: 50% IFA US Small Cap Index and 50% IFA Small Cap Value IndexJanuary 1978 – December 1993: Dow Jones US Select REIT Index minus 0.0183%/mo (mutual fund exp ratio)Febuary 1993 – June 2008: DFA US Real Estate Securities Symbol: DFREXJuly 2008 – Present: DFA Global Real Estate Securities Portfolio Symbol: DFGEX
Time-SeriesConstruction
Investment Objective of DFA Global Real Estate Securities Portfolio (DFGEX) is to achieve long-term capital appreciation.
One Year Three Years Five Years Ten Years Number of HoldingsWeighted Average Market Cap
Aggregated Price-to-Book
Turnover Ratio (as of 10/31/14)Wtd. Avg Dividend-to-Price
Expense Ratio (as of 7/21/15)
383$13,812M1.73
NA4.06%0.24%
0.69% 7.94% 9.54% --%*DFA Global Real Estate Sec. Portfolio -0.44% 7.18% 8.68% 4.84%S&P Global REIT Index**
Average Annual Total Return
*Inception Date 6/4/08 **Net Dividends ^All Data as of Dec 31, 2015. Returns include the impact of reinvested dividends and capital gains distributions. For updates see www.ifaindexes.com.
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January 1928 – December 1969: IFA US Large Value IndexJanuary 1970 – December 1974: MSCI EAFE Gross Dividends minus 0.0375%/mo (mutual fund exp ratio)January 1975 – June 1993: MSCI EAFE Value Gross minus 0.0375%/mo (mutual fund exp ratio)July 1993 – February 1994: LWAS/DFA International High BtM PortfolioMarch 1994 – Present: DFA International Value Portfolio Symbol: DFIVX
Time-SeriesConstruction
Investment Objective of DFA International Value Portfolio I (DFIVX) is to achieve long-term capital appreciation. The portfolio pursues its objective by investing substantially all of its assets in its corresponding Master Fund, The International Value Series, which has the same investment objective and policies as the DFA International Value Portfolio.
One Year Three Years Five Years Ten Years Number of HoldingsWeighted Average Market Cap
Aggregated Price-to-Book
Turnover Ratio (as of 10/31/14)Wtd. Avg Dividend-to-Price
Expense Ratio (as of 10/31/14)
507$44,608M0.97
17.00%4.08%0.43%
-6.31% 2.37% 0.79% 2.44%DFA Intl. Value Index Portfolio -3.04% 3.93% 2.79% 2.92%MSCI EAFE Index*
Average Annual Total Return
*Net Dividends ^All Data as of Dec 31, 2015. Returns include the impact of reinvested dividends and capital gains distributions. For updates see www.ifaindexes.com.
January 1928 – December 1969: IFA US Small Cap IndexJanuary 1970 – September 1996: Dimensional International Small Cap Index minus 0.0458%/mo (mutual fund exp ratio)October 1996 – Present: DFA International Small Company Portfolio Symbol: DFISX
Time-SeriesConstruction
Investment Objective of DFA International Small Company Portfolio I (DFISX) is to achieve long-term capital appreciation.
One Year Three Years Five Years Ten Years Number of HoldingsWeighted Average Market Cap
Aggregated Price-to-Book
Turnover Ratio (as of 10/31/14)Wtd. Avg Dividend-to-Price
Expense Ratio (as of 10/31/14)
4,103$2,261M1.47
9.00%2.670.53%
5.91% 8.14% 4.94% 5.18%DFA Intl. Small Cap Index 5.46% 7.82% 4.39% 4.09%MSCI World ex USA Small Cap Index*
Average Annual Total Return
*Price-Only ^All Data as of Dec 31, 2015. Returns include the impact of reinvested dividends and capital gains distributions. For updates see www.ifaindexes.com.
January 1928 – December 1969: IFA Small Cap Value IndexJanuary 1970 – June 1981: IFA International Small Company IndexJuly 1981 – December 1994: Dimensional International Small Cap Value Index minus 0.0575%/mo (mutual fund exp ratio)January 1995 – Present: DFA International Small Cap Value Portfolio Symbol: DISVX
Time-SeriesConstruction
Investment Objective of DFA International Small Cap Value Portfolio I (DISVX) is to achieve long-term capital appreciation.
One Year Three Years Five Years Ten Years Number of HoldingsWeighted Average Market Cap
Aggregated Price-to-Book
Turnover Ratio (as of 10/31/14)Wtd. Avg Dividend-to-Price
Expense Ratio (as of 10/31/14)
2,222$2,304M0.92
8.00%2.73%0.68%
3.99% 9.36% 5.71% 5.30%DFA Intl. Small Cap Value 5.46% 7.82% 4.39% 4.09%MSCI EAFE Small Cap Index*
Average Annual Total Return
*Price-Only ^All Data as of Dec 31, 2015. Returns include the impact of reinvested dividends and capital gains distributions. For updates see www.ifaindexes.com.
January 1928 – December 1969: 50% IFA US Large Value Index and 50% IFA US Small Cap IndexJanuary 1970 – December 1987: 50% IFA Int'l Value and 50% IFA Int'l Small CapJanuary 1988 – December 1988: MSCI Emerging Markets Index (gross div.) minus 0.05%/mo (mutual fund exp ratio)January 1989 – April 1994: Fama/French Emerging Markets Index minus 0.05%/mo (mutual fund exp ratio)May 1994 – Present: DFA Emerging Markets Portfolio Symbol: DFEM
X
Time-SeriesConstruction
Investment Objective of DFA Emerging Markets Portfolio I (DFEMX) is to achieve long-term capital appreciation. The portfolio pursues its objective by investing substantially all of its assets in its corresponding Master Fund, The Emerging Markets Series, which has the same investment objective and policies as the Emerging Markets Portfolio.
One Year Three Years Five Years Ten Years Number of HoldingsWeighted Average Market Cap
Aggregated Price-to-Book
Turnover Ratio (as of 10/31/14)Wtd. Avg Dividend-to-Price
Expense Ratio (as of 10/31/14)
1,123$35,203M1.44
5.00%2.660.56%
-15.81% -7.10% -4.63% 3.95%DFA Emerging Markets Portfolio I -14.92% -6.76% -4.81% 3.61%MSCI Emerging Markets Index*
Average Annual Total Return
*Gross Dividend ^All Data as of Dec 31, 2015. Returns include the impact of reinvested dividends and capital gains distributions. For updates see www.ifaindexes.com.
January 1928 – December 1969: IFA US Small Cap Value IndexJanuary 1970 – December 1988: IFA Emerging Markets IndexJanuary 1989 – April 1998: Dimensional Emerging Value Index minus 0.05%/mo (mutual fund exp ratio)May 1998 – Present: DFA Emerging Markets Value Portfolio Symbol DFEVX
Time-SeriesConstruction
Investment Objective of DFA Emerging Markets Value Portfolio I (DFEVX) is to achieve long-term capital appreciation. The portfolio pursues its objective by investing substantially all of its assets in its corresponding Master Fund, The Dimensional Emerging Markets Value Fund, which has the same investment objective and policies as the Emerging Markets Value Portfolio.
One Year Three Years Five Years Ten Years Number of HoldingsWeighted Average Market Cap
Aggregated Price-to-Book
Turnover Ratio (as of 10/31/14)Wtd. Avg Dividend-to-Price
Expense Ratio (as of 10/31/14)
2,282$21,968M0.82
12.00%3.28%0.55%
-18.77% -9.27% -7.89% 3.71%DFA Emerging Markets Value Portfolio I -14.92% -6.76% -4.81% 3.61%MSCI Emerging Markets Index*
Average Annual Total Return
*Gross Dividend ^All Data as of Dec 31, 2015. Returns include the impact of reinvested dividends and capital gains distributions. For updates see www.ifaindexes.com.
January 1928 – December 1969: IFA US Small Cap IndexJanuary 1970 – December 1988: IFA Emerging Markets IndexJanuary 1989 – March 1998: Fama/French Emerging Markets Small minus 0.065%/mo (mutual fund exp ratio)April 1998 – Present: DFA Emerging Markets Small Cap Portfolio Symbol: DEMSX
Time-SeriesConstruction
Investment Objective of DFA Emerging Markets Small Cap Portfolio I (DEMSX) is to achieve long-term capital appreciation. The portfolio pursues its objective by investing substantially all of its assets in its corresponding Master Fund, The Dimensional Emerging Markets Value Fund, which has the same investment objective and policies as the Emerging Markets Value Portfolio.
One Year Three Years Five Years Ten Years Number of HoldingsWeighted Average Market Cap
Aggregated Price-to-Book
Turnover Ratio (as of 10/31/14)Wtd. Avg Dividend-to-Price
Expense Ratio (as of 10/31/14)
3,388$1,127M1.16
9.00%2.62%0.72%
-8.70% -2.48% -2.24% 7.18%DFA Emg. Markets Small Cap Portfolio -14.92% -6.76% -4.81% 3.61%MSCI Emerging Market Index**
Average Annual Total Return
*Gross Dividend ^All Data as of Dec 31, 2015. Returns include the impact of reinvested dividends and capital gains distributions. For updates see www.ifaindexes.com.
January 1928 – June 1963: One-Month T-Bills minus 0.015%/mo (mutual fund exp ratio)July 1963 – July 1983: One-Year T-Note Index minus 0.015%/mo (mutual fund exp ratio)August 1983 – Present: DFA One-Year Fixed Income Portfolio Symbol DFIHX
Time-SeriesConstruction
Investment Objective of Investment Objective of DFA One-Year Fixed Income Portfolio (DFIHX) is to achieve a stable real return in excess of the rate of inflation with a minimum of risk.
One Year Three Years Five Years Ten Years DurationAverage Portfolio Maturity RangeExpense Ratio (as of 10/31/14)
0.95 Years0.96 Years0.17%
0.31% 0.30% 0.49% 1.93%DFA One-Year Fixed Income Index Portfolio 0.15% 0.20% 0.28% 1.78%One-Year US Treasury Note*
Average Annual Total Return
*BofA Merrill Lynch Index ^All Data as of Dec 31, 2015. Returns include the impact of reinvested dividends and capital gains distributions. For updates see ifaindexes.com.
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January 1928 – December 1972: Five-Year T-Notes minus 0.0167%/mo (mutual fund exp ratio)January 1973 – May 1987: Barclays Intermediate Government Bond Index minus 0.0167%/mo (mutual fund exp ratio)June 1987 – Present: DFA Short-Term Govt. Portfolio (Five-Year Gov't Income) Symbol: DFFGX
Time-SeriesConstruction
Investment Objective of DFA Short-Term Government Portfolio (DFFGX) is to maximize total returns from the universe of debt obligations of the U.S. Government and U.S. government agencies.
One Year Three Years Five Years Ten Years DurationAverage Portfolio Maturity RangeExpense Ratio (as of 10/31/14)
2.82 Years2.91 Years0.19%
0.99% 0.59% 1.35% 3.02%DFA Short-Term Gov't Portfolio 0.97% 0.68% 1.24% 3.05%Capital US Gov't Bond Index Int.*
Average Annual Total Return
*Barclays Index ^All Data as of Dec 31, 2015. Returns include the impact of reinvested dividends and capital gains distributions. For updates see ifaindexes.com.
January 1928 – December 1984: IFA Short Term Government IndexJanuary 1985 – November 1990: Citi Global Government Bond Hedged minus 0.0233%/mo (mutual fund exp ratio)December 1990 – Present: DFA Five-Year Global Fixed Income Portfolio Symbol: DFGBX
Time-SeriesConstruction
Investment Objective of DFA Five-Year Global Fixed Income Portfolio (DFGBX) is to provide a market rate of return for a fixed income portfolio with low relative volatility of returns.
One Year Three Years Five Years Ten Years DurationAverage Portfolio Maturity RangeExpense Ratio (as of 10/31/14)
3.61 Years3.79 Years0.27%
1.45% 1.60% 2.62% 3.57%DFA Five-Year Global Fixed Portfolio 1.00% 1.17% 1.58% 2.90%World Gov't Bond 1-5 Years*
Average Annual Total Return
*Citigroup Index, Hedged ^All Data as of Dec 31, 2015. Returns include the impact of reinvested dividends and capital gains distributions. For updates see ifaindexes.com.
Jan 1928 - Nov 1992: Dimensional US Large Cap Growth minus 0.01%/mo (mutual fund exp ratio)Dec 1992 - Present: Vanguard Growth Index Inst'l: VIGIX
Time-SeriesConstruction
Investment Objective of Vanguard Growth Index (VIGIX) The investment seeks to track the performance of a benchmark index that measures the investment return of large-capitalization growth stocks. The fund employs a passive management investment approach designed to track the performance of the MSCI US Prime Market Growth index, a broadly diversified index of growth stocks of large U.S. companies. It attempts to replicate the target index by investing all, or substantially all, of assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index.
One Year Three Years Five Years Ten Years Number of HoldingsMedian Market Cap
367$60.6B 3.32% 15.83% 13.14% 8.47%Vanguard Growth Index
Average Annual Total Return
^All Data as of Dec 31, 2015. Returns include the impact of reinvested dividends and capital gains distributions. For updates see www.ifaindexes.com.
January 1928 - February 1971: Fama/French US Small Growth Simulated Portfolio (ex Utilities) Mar 1971 - Present: NASDAQ % Change; Excluding Dividends (Source: Yahoo! Finance)
Time-SeriesConstruction
Investment Objective of IFA NSDQ Index To capture the return of the NASDAQ-100 Index, excluding the impact of dividends. The NASDAQ-100 Index includes 100 of the largest domestic and international non-financial securities listed on The Nasdaq Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain securities of financial companies including investment companies.
One Year Three Years Five Years Ten Years Number of HoldingsMedian Market Cap
106$108.8B 8.66% 21.52% 15.35% 9.41%Nasdaq
Average Annual Total Return
^All Data as of Dec 31, 2015. For updates see www.ifaindexes.com.
Jan 1928 - May 1998: Dimensional US Small Cap Growth minus 0.01%/mo (mutual fund exp ratio)Jun 1998 - Present: Vanguard Small-Cap Growth Index Inst'l :VSGIX
Time-SeriesConstruction
Investment Objective of Vanguard Small-Cap Growth Index (VSGIX) The investment seeks to track the performance of a benchmark index that measures the investment return of small capitalization growth stocks. The fund employs a passive management investment approach designed to track the performance of the MSCI US Small Cap Growth index, a broadly diversified index of growth stocks of smaller U.S. companies. It attempts to replicate the target index by investing all, or substantially all, of assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index.
One Year Three Years Five Years Ten Years Number of HoldingsMedian Market Cap
367$3.1B 3.91% 14.30% 11.62% 9.08%Vanguard Small-Cap Growth Index
Average Annual Total Return
^All Data as of Dec 31, 2015. Returns include the impact of reinvested dividends and capital gains distributions. For updates see www.ifaindexes.com.
Jan 1928 - Apr 1992: Dimensional US Marketwide minus 0.01%/mo (mutual fund exp ratio)May 1992 - Present: Vanguard US Total Market Index Inst'l :VITSX
Time-SeriesConstruction
Investment Objective of Vanguard US Total Market Index (VITSX) The investment seeks to track the performance of a benchmark index that measures the investment return of the overall stock market. The fund employs a passive management strategy designed to track the performance of the MSCI US Broad Market index, which consists of all the U.S. common stocks traded regularly on the New York Stock Exchange and the Nasdaq over-the-counter market. It typically holds 1,200-1,300 of the stocks in its target index.
One Year Three Years Five Years Ten Years Number of HoldingsMedian Market Cap
3,797$41.6B 2.33% 15.42% 12.60% 7.73%Vanguard US Total Market Index
Average Annual Total Return
^All Data as of Dec 31, 2015. Returns include the impact of reinvested dividends and capital gains distributions. For updates see www.ifaindexes.com.
January 1928 - December 1989: S&P 500 Ibbotson Associates SBBI data courtesy of Morningstar Direct,January 1990 - Present: S&P 500 Index data courtesy of Morningstar Direct
Time-SeriesConstruction
Investment Objective of S&P 500® Index Widely regarded as the best single gauge of the U.S. equities market, this world-renowned index includes 500 leading companies in leading industries of the U.S. economy. Although the S&P 500® focuses on the large cap segment of the market, with approximately 75% coverage of U.S. equities, it is also a proxy for the total market. S&P 500 is part of a series of S&P U.S. indices that can be used as building blocks for portfolio construction.
One Year Three Years Five Years Ten Years Number of HoldingsMedian Market Cap
504$73.7B 1.39% 15.13% 12.57% 7.31%S&P 500 Index
Average Annual Total Return
^All Data as of Dec 31, 2015. Returns include dividends. For up dates see www.ifaindexes.com.
January 1928 – June 1977: Five-Year T-Notes minus 0.015%/mo (mutual fund exp ratio)July 1977 – December 1989: ML US Treasury Index 1-3 Years minus 0.015%/mo (mutual fund exp ratio)January 1990 – February 1996: Citi World Gov't Bond 1-3 Years Hedged minus 0.015%/mo (mutual fund exp ratio)March 1996 – Present: DFA Two-Year Global Fixed Income Portfolio Symbol: DFGFX
Time-SeriesConstruction
Investment Objective of DFA Two-Year Global Fixed Income Portfolio (DFGFX) is to maximize total returns consistent with preservation of capital.
One Year Three Years Five Years Ten Years DurationAverage Portfolio Maturity RangeExpense Ratio (as of 10/31/14)
1.43 Years1.44 Years0.17%
0.33% 0.39% 0.59% 2.05%DFA Two-Year Global Fixed Income Portfolio 0.49% 0.58% 0.78% 2.17%World Gov't Bond Index 1-3 Years*
Average Annual Total Return
*Citigroup Index, Hedged ^All Data as of Dec 31, 2015. Returns include the impact of reinvested dividends and capital gains distributions. For updates see ifaindexes.com.
i IFA | 12-Step Brochure
References
1. John C. Bogle, The Little Book of Common Sense Investing: the Only Way to Guarantee Your Fair Share of Market Returns. Hoboken, NJ: John Wiley & Sons, 2007. 56. Print.
2. Jason Zweig, “What Fund Investors Really Need To Know. Our exclusive study of mutual fund returns shows which ones really made money for investors and which ones took shareholder for a costly ride.” CNNMoney - Business, Financial and Personal Finance News. June 1, 2002. Web. 14 Nov. 2011. 10. http://money.cnn.com/magazines/moneymag/moneymag_archive/2002/06/01/323312/index.htm.
3. Dalbar. “Helping Investors Change Behavior to Capture Alpha.” Quantitative Analysis of Investor Behavior. April 2013. 12. http://www.qaib.com/.
4. John C. Bogle, “Bogle Financial Markets Research Center.” Vanguard - Mutual Funds, IRAs, ETFs, 401(k) Plans, and More. 8 Jan. 2010. Web. 14 Nov. 2011. http://vanguard.com/bogle_site/sp20071015.html.
5. Ilia D. Dichev, Gwen Yu, “Higher Risk, Lower Returns: What Hedge Fund investors Really Earn.” Journal of Financial Economics. 25 Jan. 2011. http://www.people.hbs.edu/gyu/HigherRiskLowerReturns.pdf
6. Russell Kinnel, “Bad Timing Eats Away at Investor Returns.” Morningstar. 15 Feb. 2010. Web. 14 Nov. 2011. http://news.morningstar.com/articlenet/article.aspx?id=325664.
7. Bogle, John. “The Arithmetic of All-In Investment Expenses.” Financial Analysts Journal, January/February 2014 (pp. 13-21)8. Dalbar. “Helping Investors Change Behavior to Capture Alpha.” Quantitative Analysis of Investor Behavior. April 2013. 12. http://
www.qaib.com/.9. John C. Bogle, “Common Sense on Mutual Funds.” Hoboken, NJ: Wiley, 2010. 331. Print.10. Jay Franklin, Mark Hebner, “Advisor’s Alpha: The View from Vanguard.” IFA Articles, Jan. 27, 2014. http://www.ifa.com/articles/
advisor_alpha_view_from_vanguard11. Rajeeva Sinha, Vijay Jog. “Fund Flows and Performance.” 1 Jan. 1998. http://economics.ca/2005/papers/0387.pdf12. John C. Bogle, “The Little Book of Common Sense Investing: the Only Way to Guarantee Your Fair Share of Market Returns.”
Hoboken, NJ: John Wiley & Sons, 2007. 51. Print. 13. Geoffrey C. Friesen, Travis R. A. Sapp. “Mutual fund flows and investor returns: An empirical examination of fund investor timing
ability.” University of Nebraska - Lincoln. 1 Sept. 2007.14. Andrew Clare, Nick Motson. “Do UK retail investors buy at the top and sell at the bottom?” Cass Business School. 1 Sept 2010.
http://www.cass.city.ac.uk/__data/assets/pdf_file/0003/69933/Do-UK-retail-investors-buy-at-the-top-and-sell-at-the-bottom.pdf15. Mark Hebner, “IFA Client Study”, IFA Articles, 28 Jul. 2015. https://www.ifa.com/articles/updated_article_client_study/16. John C. Bogle, “The Little Book of Common Sense Investing: the Only Way to Guarantee Your Fair Share of Market Returns.”
Hoboken, NJ: John Wiley & Sons, 2007. 56. Print.17. Morningstar. “Morningstar Index Yearbook 2005.” Morningstar, 12 May 2006. Web. 14 Nov. 2011. 2. http://indexes.morningstar.
com/Index/PDF/MorningstarIndexesYearbook2005.pdf.18. John C. Bogle, “The Little Book of Common Sense Investing: the Only Way to Guarantee Your Fair Share of Market Returns.”
Hoboken, NJ: John Wiley & Sons, 2007. 51. Print.19. Mark Hebner, “IFA Client Study”, IFA Articles, 28 Jul. 2015. https://www.ifa.com/articles/updated_article_client_study/20. Morningstar. “Morningstar Index Yearbook 2005.” Morningstar, 12 May 2006. Web. 14 Nov. 2011. 3. http://indexes.morningstar.
com/Index/PDF/MorningstarIndexesYearbook2005.pdf. The 109% figure that was calculated in the Morningstar study occurred during a period when there was a high benefit to rebalancing. The 109% applied to individual mutual funds only and would not be applicable to the return shown for a portfolio of mutual funds across different asset classes.
21. Laurent Barras, Olivier Scaillet, and Russ Wermers, “False Discoveries in Mutual Fund Performance: Measuring Luck in Estimating Alphas,” The Journal of Finance, (2010).
22. Mark Hulbert, “The Prescient are Few,” NY Times (NY, NY), July 13, 2008.23. Standard & Poor’s, “S&P Indices Versus Active Funds (SPIVA®) Persistence Scorecard, Year-End 2012,” (2013). 24. John R. Graham and Campbell R. Harvey, “Market Timing Ability and Volatility Implied in Investment Newsletters’ Asset Allocation
Recommendations,” Journal of Financial Economics, vol. 42, no. 3 (1996). 25. Amit Goyal and Sunil Wahal, “The Selection and Termination of Investment Management Firms by Plan Sponsors,” Goizueta
Business School, (November 2004). 26. S&P Indices, Research and Design, “Standard and Poor’s Indices vs. Active Funds (SPIVA ®) Scorecard,” Year-End 2012 (2013). 27. John C. Bogle, The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns,
Hoboken, NJ: John Wiley & Sons, Inc., (2007).28. Eugene F. Fama and Kenneth R. French, “Common risk factors in the returns on stocks and bonds,” Journal of Financial
Economics, vol. 33, (1993)29. Dalbar, Inc. “2013 Quantitative Analysis of Investor Behavior, “ (2013); Dimensional Returns 2.0, ifabt.com.30. Laurent Barras, Olivier Scaillet, and Russ Wermers, “False Discoveries in Mutual Fund Performance: Measuring Luck in Estimating
Alphas,” The Journal of Finance, (2010).31. William Sharpe, “Likely Gains from Market Timing,” Financial Analysts Journal, vol. 31, no. 2 (1975).32. “Technical Note: Calculation of Forecasting Accuracy,” SEI Corporation position paper, April 1992. 33. Sample list taken from CXO Advisory Group, LLC, www.cxoadvisory.com/gurus/34. Amit Goyal and Sunil Wahal, “The Selection and Termination of Investment Management Firms by Plan Sponsors,” The Journal of
Finance, vol. 63, no. 4 (2008).35. John C. Bogle, “The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market
Returns,” (Hoboken: John Wiley & Sons, Inc. 2007). 36. Edelen, Roger, Richard Evans & Gregory Kadlec. “Shedding Light on ‘Invisible’ Costs: Trading Costs and Mutual Fund
Performance.” Financial Analysts Journal: Vol. 69, No. 1, 201337. Dimensional study of 44 institutional equity pension plans with $425 billion total assets, 2002.
1-20 . Source of studies for Investor Success chart
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