Reply to @Old_Joe: What you did is called stress testing that is gaining interest in the RIA community because of new vendor tools as an alternative or complement to Monte Carlo Simulations. The latter was an improvement over previous method of assuming some average returns but it has serious problems in inputs and interpretation.
A serious problem for an investor is not calculating the probability for success/failure but understanding what a failure might imply for their life. If you are just told you have a 80% chance that you will not outlive your assets, it is very different from being told you will probably do OK with 80% chance but there is a 20% chance that you may have to sell your house and move to a cheaper town if there was a recession like the previous one. People may make very different decisions and not feel betrayed when the very low probability event happens and can be prepared for it. There are vendors who have created platforms to stress test for various combination of events and variables and test a financial plan for it. Not sure what is available for retail investor use. This is a much more comprehensive test than the spreadsheet calculation you did but similar in intent. While stress testing tools have been around for a while, their use became more obvious after the last financial meltdown where the use of MC to price/test anything from CDOs to portfolios was shown to be useless because it didn't prepare people on how to manage low probability events if they were to happen. We don't build bridges and aircraft that way.
I have a strong suspicion that these "increase equity with age" will not fare so well in stress testing scenarios and the implications in some of those scenarios.
I am sure over time these stress testing tools will become as common as these retirement planners. However, they are all dangerous for DIYers to interpret in the same way medical lab tests are dangerous for non medically trained people to interpret and so primarily for entertainment than making any serious decisions. Self-diagnosis of medical health is as bad as self-diagnosis of financial health except in the case of plentiful health with sufficient margins to survive when the self diagnosis was bad!
Practically, the goal should be to overcompensate as much as possible or arrange the circumstances so that the available resources overcompensate in the same way bridges and aircraft are over-engineered much above and beyond what tests and simulations suggest.

One of the better books on frugality and investing was written by James Stowers.
http://www.amazon.com/Yes-You-Achieve-Financial-Independence/dp/0836280784
Mr. Stowers was a founder of American Century, previously Twentieth Century. A real class act amongst the investment community. He is still active in cancer research as some of the profits from American Century fund a research center in Kansas City.
Here is a chance for those who are interested to use the Amazon link from this page to get this book.

Reply to @bee:
Hi Bee,
You surely contributed an excellent and useful post.
I am very pleased to read your endorsements of the various Monte Carlo simulation products. I have been a long advocate for these workhorse financial tools, and have been surprised at the reluctance of an MFO minority who persistently resist application of these proven tools. Thank you for referencing these noteworthy Monte Carlo simulation programs.
The referenced research paper and its recommendations are themselves the outcomes from a series of Monte Carlo calculations. The WSJ article exclaims that 10,000 cases were completed in the analyses. That may appear to be a large number, but not so when making randomly selected investment returns trials. To assure small methodology errors, Monte Carlo studies usually do large multiples of 10,000 cases.
We are definitely on the same page, and likely even within the same paragraph, when you astutely observed that “The biggest gift of retirement is the gift of time”. Yes it is.
I consider “time” is my most precious resource. That acknowledgement was one significant factor in my decision to cutback on the time I committed to my investments. Index products fit snuggly into that framework.
There is a very positive aspect with the passage of time at my advanced age. The price continues to decrease. According to Longevity Tables, I pay only about one-half year in expected lifespan for each year that I survive. That’s not a bad tradeoff.
I really enjoy these brief exchanges.
Do well and stay healthy.
Best Wishes.

These two are not comparable. MFO is an excellet fund selection resource where you can get exposure to a lot of different funds with often useful reviews and commentary. But there is very little meaningful information on portfolio construction other than the conventional percentages or building kitchen sink collection of funds.
Betterment and sites like that including WealthFront are portfolio management platforms for simple portfolios. One might argue paying an AUM based fee is ridiculous for how much help they provide. That business model exists only because RIAs used to ask for even more. These sites are for people who would never visit a financial site or forum and would otherwise keep most of their portfolio in cash or CDs or something foolish.
I am not sure people here do any better necessarily in portfolio performance but the pursuit itself has its own rewards.

http://www.sec.gov/Archives/edgar/data/1293967/000089418914000157/primecap_497e.htm
PRIMECAP ODYSSEY FUNDS
--------------------------------------------------------------------------------
SUPPLEMENT DATED JANUARY 13, 2014 TO THE
PROSPECTUS DATED FEBRUARY 28, 2013
--------------------------------------------------------------------------------
This supplement provides new and additional information that affects information contained in the Prospectus and should be read in conjunction with the Prospectus.
Effective January 20, 2014, the PRIMECAP Odyssey Aggressive Growth Fund (the “Aggressive Growth Fund” or “Fund”) will be closed to most new investors. PRIMECAP Management Company (“PRIMECAP”), the Fund’s investment advisor, believes that it is in the best interest of the shareholders of the Aggressive Growth Fund to reduce the amount and pace of investments into the Fund. In addition, in most cases you will not be permitted to exchange shares of another PRIMECAP Odyssey Fund into the Aggressive Growth Fund unless you are already a shareholder of the Aggressive Growth Fund.
You may continue to purchase shares of the Aggressive Growth Fund, or open a new account to do so, only if:
- You are an existing shareholder of the Aggressive Growth Fund (either directly or through a financial intermediary) and you:
o Add to your account through the purchase of additional shares;
o Add to your account through the reinvestment of dividends or capital gain distributions;
o Open a new account that is registered in your name or has the same taxpayer identification or social security number assigned to it as an existing Fund account (this includes UGMA/UTMA accounts with you as custodian). This applies only to individuals or organizations opening accounts for their own benefit. It does not apply to institutions opening accounts on behalf of their clients, except as follows: institutions that maintain omnibus account arrangements with the Aggressive Growth Fund may purchase shares of the Aggressive Growth Fund in their omnibus accounts for clients who currently own shares of the Aggressive Growth Fund through such accounts.
- You are a separately managed account client of PRIMECAP.
- You are a participant in a qualified defined contribution retirement plan (for example, 401(k) plans, profit sharing plans, and money purchase plans), 403(b) plan, or 457 plan that invests through existing accounts in the Fund (each, a “Plan”). A Plan may open new participant accounts within the Plan. IRA transfers and rollovers from a Plan can be used to open new accounts in the Aggressive Growth Fund. PRIMECAP also may selectively allow new retirement plan accounts to invest in the Fund, but it reserves the right without further notice to restrict purchases by retirement plans that did not previously own shares of the Fund.
- You are a current trustee or officer of the Aggressive Growth Fund, or an employee of PRIMECAP, or a member of the immediate family (spouse or child) of any of these persons.
- You are a client of an investment advisor that invests client assets in the Funds.
Once you close an account with the Fund, the Fund will not accept additional investments from you unless you meet one of the specified criteria above. PRIMECAP reserves the right to: (i) make additional exceptions that, in its judgment, do not adversely affect its ability to manage the Aggressive Growth Fund; (ii) reject any investment or refuse any exception, including those detailed above, that it believes will adversely affect its ability to manage the Aggressive Growth Fund; and (iii) close and re-open the Fund to new or existing shareholders at any time. You may be required to demonstrate eligibility to buy shares of the Aggressive Growth Fund before an investment is accepted.
The PRIMECAP Odyssey Stock Fund and PRIMECAP Odyssey Growth Fund remain open to all investors, and you may purchase shares of those Funds at any time.
* * * * *
Please retain this supplement for future reference.

Hi NumbersGal,
It is good to hear from an investor who is specifically dedicated to financial numbers. The markets are awash with a tsunami of statistical data sets. I am not surprised by your question or interest. It is both probing and challenging. The empirical evidence is that women are better long-term investors than men. Good for you all.
I completely agree with your judgment that an examination of persistent performance demands a period that is longer than 3 years. I ventured down that same road in the mid-1980s with attempts to discover fund managers with superior long-term stock picking skills. It was relatively easy to find managers who outperformed in upside markets, but far more difficult to find those who maintained that advantage to dampen downside risk. In general, I failed.
That very specific information was not readily available in that timeframe. It’s easier these days with outfits like Morningstar recording mutual fund Alphas for extended periods (like 15 years). From the Alphas, an Information Ratio can be computed that will permit some initial sorting. but it is still a daunting task, especially given the level of detail that you seek.
In a qualitative sense, a much longer data accumulation period is needed beyond 3 years. If specific quantification is truly required, a 10-year data period seems like a good departure point.
However, if more precision is required, it is a doable task with some considerable research effort and elbow grease on your part.
I would not invest too much time reviewing deep history. The applicable timescale for current fund managers likely goes back only 20 years or so. There is some good news in that regard. Jeremy Siegel’s post WW II stock data suggests four major trending periods since that date: two upward pricing sub-periods and two more or less neutral return groupings. His latest segment (2000-2013) is representative of a neutral period with significant both upward and downward price movements.
A fund manager’s stock picking acumen can be tested against this recent period. One attractive candidate method would be an initial sort to identify plus Alpha managers. Next, the manager’s downward resistant skills can be challenged by examining his performance in minor to major downward movements. Identify more numerous small downward return periods (like 5 % losses), less numerous 10 % negative periods, and finally tumultuous and rather rare 15 % or more panics. Examine the manager’s performance in these selected downward directed spirals as a test of his flexibility.
That’s a ton of work. I have been down that same road with little success. Many pitfalls and traps exist. Manager’s change funds within an organization, and also change firms. The research staff that supports any manager influences his buy/sell decisions, and that is in constant flux. Even successful football quarterbacks of the Payton Manning and Tom Brady caliber depend greatly on their supporting teammates, staff and organization’s policies.
Past performance is surely no guarantee of future success. In fact, since the strongest pull in the investment world is a reversion-to-the-mean, the likelihood of a reverse outcome is more probable.
The Index Fund Advisors (IFA) have some excellent review articles on this matter. Here is a Link to their Section 5 which documents some of the studies on this topic from guys of David Swensen’s quality:
http://www.ifa.com/12steps/step5/
Of course, IFA is not an unbiased organization. But the assembled articles summarize some serious academic research. Be sure to read “The Fired Beat the Hired” and the “Pension-Gate” reports.
Even with almost limitless resources, institutional agencies can not often identify managers who will outdistance Index benchmarks with similar risk characteristics. The record is dismal for active managers even under professional selection resources that an individual investor can never hope to equal or emulate.
As noted in the referenced work and credited to Bob Dylan: "the first ones now will later be last, for the times they are a changin." Persistence seems like an absent commodity in the investment universe.
As I mentioned earlier, I have traveled this rocky road. In the 1950s I traded individual stocks. In the 1980s I discovered mutual funds and still own one of my originals. In the 1990s, I became acquainted with John Bogle’s “Common Sense on Mutual Funds”. During this extended period I morphed from a 100 % active investor to a current 50/50 % mix. I am a slow learner. I anticipate that I will end with the conventional 20/80 commitment, heavy in Index products. For me, the evidence is overwhelming and compelling.
I recommend you consider aborting any detailed and time-sink project to identify that rare superior fund manager under all market circumstances. Many have and continue to try, and about the same number have failed. The odds of finding such persistent mangers are extremely low, and the potential excess returns are pitiful, especially when contrasted against the more likely outcome of choosing unwisely and potentially suffering more painful and portfolio damaging below benchmark performance.
I always hesitate to throw cold water on proposed research. We only learn when we explore, even when we fail to satisfy our original objectives. But the pathway that you propose to explore has been well traveled without many persistent management discoveries. All these Gods have feet of clay; superheroes are a myth.
Whatever your choice, I fully respect it, and will forever wish you well.
Best Regards.

Hi Guys,
A heavy fog blanketed my small part of the world, wetted everything, and caused me to cancel my Sunday morning tennis. Having spare time, I belatedly decided to join the wisdom (or foolishness) of the crowd on this topic. It certainly seems to have attracted much more attention than warranted.
On the positive side, I, and I suspect a host of other MFO members, have benefited from some of Ted’s voluminous postings. The MFO website would be of lesser utility without them. That is not merely my assertion; it is an experimental fact. The site became a far duller, less vibrant, and less useful resource when Ted elected to drop his contributions for a time many months ago. In that sense, Ted is a treasure that should be respected and protected.
However, there is also a negative side to Ted’s numerous references. For the most part, Ted submits Naked Unqualified Posts. Given the current posting structure, these dilute the impact of serious exchanges within the Discussion section.
They are Naked in the sense that all we have is a title reference to some published writing; the post is devoid of any information that is contained in the reference. It is Unqualified in the sense that no assessment of the reference’s content is offered. It is a blind reference. I choose to visit a few of these references based on my perception of the source’s credibility. I am more likely to access a WSJ reference over one from Brooklyn Joe who consults astrological charts for investment decision making.
The fundamental question here is whether Ted’s simple references merit inclusion in the MFO section called “Discussion”. Most of his posts contain zero discussion. In terms of a MFO investment idea conversation, this type of post is more properly classified as a “candidate discussion”. Perhaps it deserves its own website category; perhaps it could be merged into the resource section; perhaps no action need be taken.
In the end, this is Professor David Snowball’s project. He owns the site and consequently makes the rules and sets the standards. His rules are modest and his standards are the highest. Evidence of that judgment is found every month in his grand Commentary section. He gets to choose. Regardless of his resolution, I will remain a loyal participant in this worthwhile project. I’m confident that Professor Snowball will make both a wise and prudent decision.
For what it’s worth, my preference is for a separate listing of simple references. They do not qualify as discussion material, at least not yet. If the referenced material includes some assessments, some pros and cons, or some meaningful debate, then it fits snuggly into the Discussion format. And I mean much more than just “atta-boy” or “plus one” scoring commentary. These are useless for decision making.
There are endless ways to do some sorting, likely none of them perfect, and all costly in terms of effort to accomplish. Luckily, that’s not in my wheelhouse nor is it a task assigned to me. I would botch it big time. Professor Snowball and staff will not, especially given the growing popularity of this fine resource.
Ted is just being Ted. Over the many years that I have known him by way of these Internet exchanges, I do sense a growing impatience and intolerance. He has changed; I have changed; everyone else has changed; the marketplace has dramatically changed. In terms of investment philosophy, Ted and I share many similar processes and preferences. I will still profitably use some of his excellent references, although I vote for a more civil discourse.
I do wish that more of our discussions attracted this much excitement and active involvement. Freely expressed opinion diversity makes for better decisions.
I realize that I’m just another voice from the Internet wilderness, but I finally surrendered to the lure of this extensive exchange.
Best Wishes for a solid financial 2014. Everyone, take a deep breath and cool-down.

Reply to @mikes425: I see. If your goal is to improve things with what you are doing, then chuck the financial advisor. The divorce is going to happen anyway. It's just who files first.

A quick search for Marla Brill turn up this freebie...thanks Ted.
"For a limited time, visit our homepage, scroll down, fill out the form and recieve a free copy!
Written by Marla Brill
The purpose of this book is to help you organize your financial and legal affairs, so that your loved ones and others will be able to step in and help with minimal difficulty if you are not able to manage things yourself. It will also be helpful to anyone who wants to “get on track” by reviewing where they stand and bringing together key information on the financial and legal aspects of their lives into one centralized place."
Sign up link:
https://aier.org/node/7944

Wow, I can just see smoke streaming out of every pore of Ted as he sees this portfolio. :-)
Mike, you need to roughly figure out your financial needs for retirement and how much it needs to appreciate or not from what you have now and where you need to be factoring in your savings, income needs, etc. Use one of the free online retirement calculators to get an idea without having to specify a portfolio. That will give you a goal for roughly how much performance you need from the portfolio. The portfolio needs to be constructed with respect to those goals. Otherwise suggestions might not be very relevant to you. Unless you want to be an active tactical allocation investor, you don't need this many funds or most of those funds. Your beta exposure to equities may not be sufficient to meet your needs which we do not know.

Hi Guys,
Earlier this week the WSJ published its quarterly mutual funds and ETFs review that incorporated 2013 data.
Overall, it’s a comprehensive summary in a concise, useful format. But I do take issue with part of their winners and losers page. I like the 5-year and 10-year listings since these provide some performance persistence insights. I believe their last quarter and 1-year winners and losers listings are a disservice to many individual investors. It invites
hot-hand thinking. It energizes herding instincts.
These short-term listings that emphasize ephemeral success stories encourage putting outcomes over process.
Consider a two-by-two matrix with good (GP) and bad (BP) processes in the horizontal direction, and good (GO) and bad (BO) outcomes in the vertical direction.
The upper left GP-GO box reflects just rewards. The mixed BP-GO illustrates a lucky happening. The mixed GP-BO demonstrates an unlucky event. The BP-BO box might well be interpreted as poetic justice.
As investors we can only control process. Outcomes are always uncertain, and we are subject to the whims of the financial Gods. So we should focus our resources at developing and persistently deploying a carefully constructed investment process.
For a passive investor that’s simply assembling a low-cost composite total market Index fund array.
For the active mutual fund proponent, it means cobbling together a portfolio with the following characteristics: low cost, low turnover, long tenured management arguably with financial degrees from Ivy league schools, and with investment philosophies and preferences similar to the clients.
The active route is more challenging with a likelihood of Index out-performance that is in the 10 % to 30 % range depending on time horizon and number of active funds within the portfolio.
Annual returns behave in a helter-skelter manner. If there is some order to annual rewards, it surely has escaped me. Patience is a prized virtue for successful investing.
Asset Allocation quilts offer a great way to illustrate the year-by-year chaos of investment category return disorder. I particularly like the report issued by the RBC Wealth Management outfit in Texas. Here is a Link to their “Market Cycle Quilts”.
https://www.rbcwmfa.com/File/Featured Reports/marketcycles.pdf
The Market Cycle Quilts document the separate and rapid elevator rides that various classes experienced since 1999 for the following clusters of investments: Asset Classes, Indices, US Economic Sectors, Developed Countries, US Stocks, US Bonds, Income Focused, and Alternate Investment groupings.
This is a huge body of data displayed in an attractive format. It is the most complete set of charts I’ve ever seen within the Quilt or Periodic Tables presentations. All these tables vividly demonstrate the volatility in annual returns; the first shall be last in short order.
One of the main themes that the marketplace constantly exhibits is a reversion-to-the-mean. The S&P Persistency and the SPIVA Scorecard reports demonstrate the fragility of superior above average performance among the professional class of investment wizards. The DALBAR studies show that individual investors do even poorer when contrasted against market averages.
I hope the Market Cycle Quilts will provide some guidance to MFOers when developing their investment philosophy and processes. Outcomes are forever uncertain. Good luck and good judgment to all you folks.
Best Regards.

Reply to @Amir:
Yes, the Pfd shares are on fire.
The GSEs' junior preferred shares popped, with Fannie Mae's preferred Series F shares (FNMAS) rising 13.3% to $9.88, while Freddie's preferred Series Z (FMCKJ) shares were up over 9.1% to $9.88. Both preferred issues have par values of $25.00.
Ralph Nadar wrote a letter to Mel Watt.
http://www.restorefanniemae.us/naderwattletter
And there was this in the news:
NEW YORK (TheStreet) -- Shares of Fannie Mae (FNMA_) and Freddie Mac (FMCC_) rose considerably on Wednesday, after comments at a Financial Services Round Table meeting indicated a willingness in Congress to consider the interests of private investors when winding down the two government sponsored enterprises (GSEs).

Happened to catch this last night. Thought it was very well done compared to some of PBS's recent endeavors. As always, Frontline comes with an "edge" (not unlike 60 Minutes) so there's not a lot of balance. Not expert enough to say much about the issues. However, from my perspective I was left with a few thoughts and questions. ... / Intrigued by the "peep hole" into big trading operations the numerous wire-taps reveal / Wondering how on earth the "little guy" playing the markets hopes to win against these sophisticated, well connected and highly informed sharpies? / Hoping I have strong fund managers who can somehow overcome the headwinds presented by these big and sometimes unscrupulous operations / Wondering - Where do you draw the line when it comes to insider trading? For example, according to the show, someone working at Company X who gives out information on the number of trucks departing the loading dock may be guilty of supplying insider information. Yet, I suspect that if someone stood in the window of a home across the street and recorded these same comings and goings for the benefit of a trader, than that would be legal. Right? Now - how about somebody putting up a $99 camera-equipped drone to so monitor? Is that legal? And, suppose the person operating the drone is married to an employee of Company X - so knows exactly where to point the camera and what to observe? ... Insider information?
Anyway .... Fascinating stuff.
Here's the full transcript http://www.pbs.org/wgbh/pages/frontline/business-economy-financial-crisis/to-catch-a-trader/transcript-54/

I was curious as to so many mentions of Fidelity funds in the article.
Here is a "bio" check for the author.....link and the editor of Fidelity Investor Newsletter.
Edit: 9 a.m. : I am not noting that what he writes in this article is improper or wrong for investors, but as JohnChisum indicates; a disclaimer might be appropriate. Also, from the Forbes Magazine bio about the author: "Lowell was formerly employed by Fidelity, where he was the senior financial reporter for Investment Vision and the formative stages of Worth magazine." I am sure he is a fine and trustworthy individual who writes more about a financial vendor with whom he feels comfortable and/or more familiar.
Regards,
Catch

Very Interesting commentary from these two funds.
They both blame Easy Fed policies. While Marketfield manager believe inflation will make situation worse for less affluent, Appleseed managers are very dire in predictions:
"
1. We expect to see higher tax rates on high income earners and higher tax rates on capital gains, gifts, estates, and
property.
2. Trade protectionism should rise, so that demand from U.S. consumers can be more easily served by domestic
manufacturers.
3. With stronger trade protections in place, the labor movement could experience a resurgence in the U.S.
4. The financial sector likely will decline as a percentage of GDP, driven by higher interest rates and structural
industry reforms.
5. The dollar likely will be devalued further in order to reduce the burden of debtors.
6. Legislation likely will be passed and executive orders likely will be issued which would make it easier for
consumers to restructure their household debts.
7. As the Federal government spends more money to protect the poor and service debt, spending in other areas will
likely be cut. "
Portfolio Positions
Appleseed - "We are similarly underweight companies that market consumer
discretionary products to high income consumers."
Marketfield -Those that have catered to luxury class, have done super well. They don't say if they believe it will continue.
FWIW, don't count out the luxury class. It is inconceivable that they would allow their taxes to go up because of "lazy" people.
https://www.nylinvestments.com/public_files/MainStay/PDF/Marketfield/Marketfield_Commentary_September_13.pdf
Appleseed Shareholder Letter, 10/25/2013
http://www.appleseedfund.com/files/documents/2013 end of year letter final.pdf

Hi Ted,
Thanks for reminding us of the January Effect. It is commonly accepted market wisdom that as January equities go, so goes the equity market for the remainder of the year. A positive January foretells above average annual equity rewards; a negative January portends a neutral market return. Maybe so, maybe not.
That interpretation is not without its critics from academia and from financial journalists. Of course, the perceived wisdom is based totally on empirical data. Like all statistics, it depends on the selected data collection period. Therefore one controversy is the relevant data period.
The original finding was based on a much shorter timeframe than is now currently accessible. Should the assessment include all data since the 1920s or should it be restricted to more recent performance since the end of World War II? This is a valid issue, especially since different timeframes will generate disparate conclusions.
A second issue is the current usage of the original January Effect. It is now interpreted as a market-wide equity effect. The original research only focused on the Small Cap market segment’s excess performance. Mark Hulbert and Jason Zweig have excellent articles on this topic. Here are the Links:
http://www.marketwatch.com/story/how-to-play-the-january-effect-2012-01-04
http://www.jasonzweig.com/uploads/1.07JanEffect.pdf
Liz Ann Sonders is one of many practitioners who morphs the original limited findings to the overall market projections. Here is her short study summary:
http://www.metalsnews.com/Metals+News/BusinessInsider/The+Business+Insider+The+Money+Game/HEADLINE718344/A+Review+Of+The+Stock+Market+January+Effect+Since+1928.htm
Ted, I admit that I risk triggering your penetrating ire, but essentially all this work is completely tied to statistics and a little Probability Theory. No fundamentals or financial models explain this anomaly. Most folks do not recognize that they are solely applying empirical observations organized in a statistical format.
From historic market data, we anticipate a 70 % likelihood that the equity market will grant positive returns in 2014. If the market delivers a positive January, that likelihood must increase above the 70 % baseline estimate. Additional data changes the odds. In the extreme, if the market is strongly positive near the end of December, the probability of a positive reward at the end of the year approaches a 100 % certainty.
We are just applying a principle that a mathematician calls “Conditional Probability”. We are updating our projections as the data stream makes itself available, and the outcome becomes more in focus.
The probability of a thrilling sports comeback diminishes towards zero as time expires. Typically, sports fans abandon the event in favor of a local watering hole as they informally assess the Conditional Probabilities, and conclude that a victory is highly unlikely.
To illustrate how data collection changes probabilities, textbooks often use a classic colored Balls in Urn problem. Two identical urns are present. One (Urn A) has 70 % Red balls with 30 % white balls; Urn B has the opposite ball distribution.
Without any data, the probability of choosing the red ball dominated urn is 50 %.
If 12 balls are experimentally withdrawn from one urn with a distribution of 8 red and 4 white balls, what is the likelihood in percentage units that you drew from the heavily populated red ball Urn A? Give it a try.
Most folks underestimate the probability. That’s because of an anchoring behavioral instinct.
If you were a Probability student you would know that a formal Conditional Probability equation exists to yield a solution. I surely do not recall that equation. But simple combination and permutation analyses that is taught at the High School level can also provide the answer. The calculation is easy.
The likelihood that the 12 ball sample was drawn from Urn A is a startling 96.7 %. Sorry for the three digit answer; probability estimates are never that precise in the real world. If a different set of balls were randomly withdrawn, the revised conditional probabilities would change depending on the specific distribution of the sampled balls.
The general lesson is that collecting just a small sample of additional data can greatly enhance chances of making a more informed and more correct decision. Statistics and Probability Theory are the workhorse tools in any such effort.
If you wish, I will provide the simple details of my calculations that permitted a correct probability estimate.
Change is a constant in the marketplace. As John Maynard Keynes noted “When the facts change I change my mind. What do you do sir?”. Like Keynes, I too change.
The dynamic markets demand flexibility in both thinking and in action. Statistical analyses and Probability Theory are the perfect tools to address and to understand the uncertainties of future market outcomes. Regardless if used formally or informally, if deployed either consciously or subconsciously, this tool set is one of the few reliable techniques for successful investing.
In the end, I will monitor the January data, and I will make minor portfolio adjustments according to the signals produced. I’ll loosely follow the data with some approbation of its insights and some appreciation of its shortcomings.
Best Regards.

Personally I don't think you need an advisor for college investing.
West Virginia's Smart 529 Select Plan is using DFA as the investment managers and funds.
http://www.smart529select.com/cs/Satellite?c=Page&cid=1150848439567&pagename=College_Savings/Page/CS_CommonPage
Reasonable fees and no advisor fees as you do not need to go thru an advisor for this plan. Anyone can invest in it but you just lose out on any State tax contribution benefits if you're outside of West Virginia. A lot of investors do invest outside of their State to get into a better plan.
But in general --- even Daniel Solin and other good advisors will tell you --- you shouldn't pay an advisor just to get into DFA funds. Pay an advisor if you really need financial advice, financial guidance, financial planning or even portfolio management. There are some advance topics they can be helpful with. And most of them probably have minimum $$$ amounts they will work with.

also allstarinvestor read
http://www.allstarinvestor.com/ - could not find the linkage
Editor's Corner
2013 Is History, 2014 Awaits
Ron Rowland
Just a few hours remain in 2013, and financial trading has come to a close. You may remember that early in the year many analysts were calling a top nearly every time the market declined. Stocks had the last laugh though, marching upward throughout the year and rendering those gloomy predictions useless to most investors and damaging to those who heeded the advice to sell.
It was a good year for most equity markets and a not-so-good year for other asset classes. Domestic small cap stocks were the big winners, gaining more than 38% by most measures. Slicing the small cap designation a little thinner, stocks in the Russell Micro-Cap Index boasted returns in excess of 45%. International stocks were mixed, with developed foreign markets gaining about 21% while emerging market stocks lost ground. The benchmark iShares MSCI Emerging Markets ETF (EEM) declined about 4% for the year.
Bonds had a tough year, and nearly every segment posted losses. The U.S. aggregate bond market shed about 2% for the year. Losses were steeper among Treasury securities, as the iShares 7-10 Year Treasury Bond ETF (IEF) dropped more than 5%, even after adding in its monthly dividend. Longer maturities meant larger losses as the Vanguard Extended Duration Treasury ETF (EDV) plunged 20%. Hopefully, bond investors have gotten the message that Treasury bonds are not automatically safe. There was no hiding in international bonds either, with developed country government issues declining 3% and emerging market bonds dropping about 10%. One segment that managed to post gains for the year was corporate high yield (“junk”) bonds, with most funds targeting this segment advancing 5% or more.
Commodities also failed to produce profits in 2013. The largest multi-commodity ETF, PowerShares DB Commodity Index (DBC), dropped more than 7%. Gold was a big story in 2013, partly because the yellow metal plunged more than 28%. Energy was the only major commodity group posting profits for the year with United States Natural Gas Fund (UNG) gaining about 10% and the United States Oil Fund (USO) advancing around 6%.
It will be another year before anyone knows the 2014 results, but that hasn’t stopped many people from making predictions. The first trades of the year will begin in less than 48 hours. We wish you a happy and prosperous New Year.
Investor Heat Map - 12/31/13
Sectors
Industrials maintained its first-place ranking, and Technology stayed close behind in second. Materials continued its recent climb, improving from fourth to third this week. Having Industrials and Materials together near the top is reminiscent of a strong global economy, and there is probably at least one economist willing to claim that is exactly what we have. Consumer Discretionary improved its absolute strength while simultaneously slipping a notch in relative strength. Health Care and Financials held their ground in the middle of the pack. Telecom and Energy swapped places with Telecom coming out on top today. The bottom of the rankings stayed much the same with the defensive groups of Consumer Staples and Utilities barely clinging to positive trends while Real Estate trails behind.
Styles
A couple subtle changes in the Style rankings produced a more definitive pattern. Small Cap Growth and Small Cap Blend swapped places, although they were in a virtual tie a week ago. Small Cap Value and Large Cape Growth also swapped places, and they too had identical momentum readings last week. However, these seemingly insignificant changes now put the four smallest capitalization segments at the top in order from Growth to Value. Micro Cap claims the overall leadership position while the three Small Cap categories take second through fourth. The lower half remains a somewhat disorganized mixture of Mid Caps, Large Caps, and Mega Cap. Mid Cap Value resides at the bottom, although with a momentum reading indicating an upward trend of 23% per year it really can’t be called weak.
Global
Europe was challenging the U.S. for the top spot a week ago, and today it has a firm grasp on the position. The U.S. dropped to second and is again facing competition, this time from the U.K. Recent strength in the British Pound has been a positive influence and could be the deciding factor over the next few weeks. World Equity and EAFE round out the top five, after which there is a large drop-off in momentum readings. Japan and Canada are next in line, just as they were a week ago. China and Emerging Markets managed to shake off their negative readings, but their new positive scores are far from being solid. Pacific ex-Japan and Latin America gained strength yet remain in negative trends.

Reply to @cman: I agree, CR is the last place I'd look for financial advice.
Regards,
Ted