Fresh Start

As the cute AT&T commercials with the children conclude, "it's not complicated; more is better."  Click here to see one of the fun AT&T commercials.  Below I have presented yet another well written fact-based article on passive investing often referred to as "indexing". However, articles on passive investing fail to capture the difference between indexing and passive investing as done by O'Reilly Wealth Advisors utilizing DFA Funds. They lump them together and call them indexing.  But there is a difference.  What is an index? Example, S&P 500 is 500 large US Companies published by Standard and Poor's.  There are thousands of indexes.   They are arbitrary - folks gather in a conference room and choose a bunch of companies they think are representative of an asset class. Sure they may use some tools to help them choose, but ultimately it is a list that is limited in length. Indexing works because you get reasonably good exposure to an asset class by "buying the index".  But why not get excellent exposure to an asset class instead of just reasonably good?  It's not complicated, more diversification is better!  DFA scientifically develops their list, and their goal is to choose almost ALL the companies in an asset class for a complete exposure. DFA's passive funds provide a more thorough exposure than index funds. It can be argued that DFA is a more appropriate "index" representing an asset class because it is more complete exposure to that asset class. More diversification wins.  And sure enough, in most asset classes, in most periods of time, DFA funds beat index funds. Sometime these differences are small and sometime significant. We have extensive data of the performance of a DFA-based portfolio vs. an index fund based portfolio.  I also have data on how individual DFA funds perform vs. their benchmark index. If you would like to see this data, please let us know. Here's yet more proof of the success of passive investing in general.   Our readers have been bombarded with proof in our newsletters - but we won't stop providing it!------------------------------------------------------ Index Funds Gain Momentum: A 2-part Research Article on "Passive" funds in Forbes Magazine  Rick Ferri, a regular writer on passive investing (often called "indexing") recently posted a 2-part article in Forbes.  We provide the links here as well as the executive summaries. Also read a brief explanation on how "indexing" is different from passive investing utilized by the funds (DFA) our firm employs. Index Funds Gain Momentum (Part 1) - Click Here. Index Funds Gain Momentum (Part 2) - Click Here. Part 1 Executive Summary A brief history on mutual fund passive investing is provided. Specific numbers demonstrating the growth in passive investing is presented. Part 2 Executive Summary The benefits of index fund investing is provided. Specific data on results, how and why is presented. What to Do Next The crucial first step is to understand what is most important to you and establish goals in alignment.  Then choose someone that can bring a team of independent experts together and assemble the advice (prioritized in your best interests) to make it happen. That said, it is completely appropriate to choose investing as the first topic. We regularly analyze folk's current investment strategy with nothing expected in return.   (We'll analyze other aspects of your strategy if you wish.) We look at: Overall Performance (vs. benchmarks & our model portfolios) Portfolio Design Diversification Fees & Expenses Give us a call.    760-804-0910

Until next issue. Sincerely, John O'ReillyO'Reilly Wealth Advisors