@MFO Members: INDEX Fund Fact Sheet:
Regards,
Ted
http://index.world/wp-content/uploads/2015/04/Index-Funds-SP500-Equal-Weight-No-Load-Fact-Sheet-063016.pdf
M* Snapshot INDEX:
http://www.morningstar.com/funds/xnas/index/quote.html

This month's commentary identifies INDEX as the entry into S&P 500 Equal Weight mutual fund. I have been interested in this area for some time but looking for an option less expensive than the INVESCO mutual fund or Guggenheim EFT. INDEX OER is .30 which is less than its competitors, however, it charges a $25.00 annual maintenance fee for small accounts (defined as less than $25,000) and the board of director (trustees) have zero dollars invested in the fund. INDEX website shows approx. $3 [million] total assets [Morningstar reports $4 million in the fund, David.]; the founder of the fund has 10k-50k invested. Just sharing information.

Interestingly, Vanguard Total Bond Market Index, BND, was not included in the article. This ETF has $162B in asset.

So far, the European CAPE ETF has done quite well:
Shiller on his CAPE ETF
UK Morningstar Performance
Kevin

Seems like the to time to be "steering" investors towards indexing, passive, and ultra diversification is when markets have been through a reasonable decline. Not at a time when:
1) the largest stock market ( U.S.) in the world is richly valued and forward return expectations as measured by many metrics are low
2) many world bond yields are sparse
3) the average investor within a few years of retirement age, who are deficient in retirement asset accumulation ( a large percentage ), will need some sort of high alpha, active / strategic & capital preservation portfolios in order to "catch up" and maintain a reasonable retirement lifestyle.
Don't hear anyone pushing for an overweight in emerging market / European bourses either which would seem to be logical and inverse to point #1.

I like the idea, but I can't see buying it just because DSENX is doing so well. I put a good portion of my self managed portfolio into DSENX (15%) after reading about the funds objectives and style, but not sure I need a European fund. I tend to think collecting funds for the sake of adding a new fund to "the team", especially sector funds, is detrimental to a portfolio's return.

Hi Davidrmoran,
We ought to stop doing this or folks will start talking.
Sorry that we disagree on who should get the most credit for the invention of such a useful worldwide product as the Internet. The concept did develop over an extended timeframe, likely starting as early as with Tesla. Lots of warranted ownership claims, but also lots of false claims.
One expert said that " the first workable prototype of the Internet came in the late 1960s with the creation of ARPANET." The ARPA name was later changed to DARPA to reflect the changing world dynamic.
I too have had the good fortune to work on DARPA teams on several projects, but that was several decades ago. DARPA carefully selects their team members wisely. I really did feel that I contributed to some sound assessments and decisions.
I stand firm. It is DARPA and not Darpa. That's my opinion and that's what MFO is all about. You are always free to disagree and to express that disagreement. MFO members get to support whoever presents a more compelling case.
EDIT: Here is the Link that I extracted the quote from:
http://www.history.com/news/ask-history/who-invented-the-internet
I made my original claim of discovery from memory. The DARPA guys told me it was so. I acknowledge that the debate has not and will likely never end. Lots of folks have added major additions to the system's functionality.
One final comment. On its own website, DARPA presents itself in full Caps. Here is a Link to that site:
http://www.darpa.mil/
That's enough said.
Best Wishes.

Hi Again Davidrmoran,
I hate hitting on a small point, but I post now with a minor complaint. You do DARPA an injustice by not using Caps uniformly.
DARPA is the Defense Advanced Research Project Agency. It was formed in 1958 in response to an emerging Soviet space threat. It's superior performance record is unmatched by any other government institution or by industry from which it draws members to establish teams with limited assignments. This agency developed the Internet.
Good for them and great for us. They deserve a proper recognition and acknowledgement for their long and successful service record. Three cheers for DARPA.
Best Wishes.

In the broad picture, I agree with the expectation that both stock and bond returns will be lower going forward. But not as explained. Stocks may violate mean reversion (i.e. overshoot the mean on the low side, rather than simply dropping closer to the mean). Parallel increases in prices and rates would keep bond real returns closer to zero.

I agree with this. The reversion to the mean is better applied to probabilities (e.g. coin toss, roulette ) and requires large numbers. None of those things apply with the stock market.
We've had lower than normal GDP growth recently and that will likely continue as was discussed in the thread on productivity recently.

Hi Bob, thanks for the comments. I completely agree with you that after several fat cows one should expect several lean ones. But mean regression is something entirely different.
What you (and I, and most everyone else) are assuming is that there's some relationship between past and future (lean follows fat). Mean regression assumes the complete opposite - that each year is completely independent and random.
Now you don't believe that next year is disconnected from this year or the past few. Neither do I. So mean regression is not applicable. Even if it were, it never predicts bad years, just that if this year was good, next year will, more likely than not, be less good.
With respect to bonds ... If one buys a bond now, even a premium bond, whether the real rate of return turns out to be positive or not depends on rate of inflation until maturity. It doesn't matter whether nominal rates go up 1% next year, that's not going to affect the coupons, the return of principal, or the real return. (Except arguably by inference that inflation may rise in tandem with the rise in nominal rates - see Fisher hypothesis.)
Inflation is still hovering below 1%. (0.8% Y/Y as of July - see graph here). Target rate is 2%. If we approach that without overshooting (admittedly a significant assumption), then 10 year bonds, yielding 1.60% nominal as of 9/2/16 should generate a small but positive real return. It doesn't matter what happens to market rates; what matters once the investment is made is the rate of inflation.
Still, there's a difference between this barely positive real return and the historical real return of 1.6%. So I agree that one needs to plan for lower returns than the historical average for both bonds and stocks. Though it remains important to be clear on the reasons for that qualitative projection, in order to make good quantitative guesses.
I think your 4-5% (nominal) is a good, conservative figure for planning purposes. IMHO that puts real return somewhere around 2%.

FYI: This has been a big year for U.S. fixed-income ETFs, which have led asset-class net creations with inflows of more than $60 billion year-to-date. In this segment, no fund has been more popular this year, or is bigger than the iShares Core U.S. Aggregate Bond ETF (AGG).
Regards,
Ted
http://www.etf.com/sections/features-and-news/comparing-total-return-bond-etfs?nopaging=1

Hi, msf. Given the fact that we have had out-sized returns for the S&P 500 the last 5 years (average of about 15.5%), with some sectors much, much higher, it is natural to expect that we could well have some lean years if longer-term average numbers are to be trusted. The 10-year S&P 500 average return is only 7.4%, a long way from the outrageously long historical number, which some retirement web sites still allow using. So if we are to have future average returns of around 7%, there will need to be some very poor years to bring the market average down to that level. Or we could have one or two awful years. Perhaps the need to keep words to a minimum meant a deeper or clearer explanation was left out. I hope this clears the water.
As for bond yields, I think the fact that we are in totally uncharted waters with interest rates might result in strongly negative returns for bonds. I am not aware that so many countries have ever suckered poor souls to buy bonds with negative yields. And while U.S. yields are higher than 0%, many bond prices are so high as to suggest owners could have negative returns if rates move up by just 1%.
I am not suggesting returns for stocks or bonds is about to be hideous, but I do believe that using an assumed average return of more than 4-5% for retirement projections is unwise.

I blinked at that comment; presumed it was a misquote or misunderstanding, or a way of telling them they would never achieve his level of performance. I took a speed-reading course in high school, which might have made me a bit faster; but I'm presuming we are expecting the 16 hr day after your commute (during which you may read), so it's possible in that context, if not reasonable.

I am still holding ARTMX in a taxable account and it too has not performed well in the past 3-5 years. To add insult to injury, from 2013 to 2015 it has distributed LTCG's of 8% to 16% of NAV and with an ER of 1.19%.
I will cut the cord this year before its November distribution and put the proceeds in VIMAX and call it a day. I never had any business of tilting to Mid-Cap Growth in the first place.
Mona

M* Ultrashort Bond Fund Returns:
http://news.morningstar.com/fund-category-returns/ultrashort-bond/$FOCA$UB.aspx
IMHO they're getting closer, but still not worth the risk as a cash substitute. The heuristic I'm using is to take the SEC yield, subtract 1/2 * duration (assuming a 1/2% rate increase over the period of a year), and compare it with a 1% bank account.
If the fund has other risk factors, I ding it qualitatively (i.e. seat of the pants):
- junk bonds (credit risk),
- adjustable rate/mortgage bonds (these somewhat artificially lower the duration, or if you prefer have higher interest risk than is represented in their duration)
- other "esoterics" (notably PSHDX, though if you want to assume risk on your cash, this has definitely done well so far)
FWIW, the lead fund mentioned in the story, MAFRX, is available NTF at TDAmeritrade.

In Jan 2015 Richard Wiggins wrote a fascinating article at the Journal of Indexes called "Cloning DFA".
This "must read" article is available here: http://tinyurl.com/cloning-dfa
As noted by Mr Wiggins in his article:

However, low-cost funds, especially ETFs, now occupy every asset category offered by DFA. As new indexes have come to market, investors can get the unloved and unwanted part of the market for a lot less. Today DFA offerings are very close to what other major market benchmark providers deliver; the DFA U.S. Small Cap Value [DFSVX], for example, is not dissimilar from the iShares SmallCap 600 Value Index Fund (IJS|A-87). Where there’s not a perfect substitute, it’s rather easy to combine two less expensive funds and create an effective clone.

The article then proceeds to show how DFSVX can be cloned with a combination of two ETFs: VBR and IWC, the Vanguard Small Cap Value and the iShares Micro Cap, respectively. While DFA funds may only be available through financial advisors that have been approved by DFA, and can charge additional fees, the ETFs are open to anyone with a brokerage account.
Below are the current (Sep 2016) expense ratios of DFSVX, and the two ETFs used in the article. At the time that the article was published (Jan 2015) the ER of DFSVX was 52 bps, and the blended ER of the Vanguard and iShares ETFs was 17 bps.

DFSVX: 52 bps
VBR:    8 bps
IWC:   60 bps

A footnote to the conclusion of the article noted that:

The authors [of the JoI article] are working with Silicon Cloud Technologies, LLC which will offer software at PortfolioVisualizer.com that computes these factors automatically.

As originally noted by MJG in Feb 2014, that site - [https://www.portfoliovisualizer.com] - is available to all. Today, it contains (among other things) the following tools:
Fama French Factor Regression Analysis (For individual funds or ETFs)
Match Factor Analysis
Once you have identified a set of potential similar funds or ETFs - based on fundamental or factor analysis - to a target fund, you can use the latter tool to derive a two-investment "clone", based on either the results of factor regressions or historical performance. The site then provides various metrics that can be used to assess the quality (i.e. accuracy) and performance of the clone versus the target fund or investment.
Here, for example, is a clone as inspired by the article: http://tinyurl.com/dfsvx-vbr-iwc
Thought that others might find the website and Jan 2015 JofI article interesting.

FYI: (Click On Article Title At Top Of Google Search)
Investors tired of earning next to nothing on their savings are finally getting some relief.
Even as short-term Treasury rates stay excruciatingly low, interest earned on many kinds of short-term securities has been rising in recent months. Yields on ultrashort bond funds, which buy debt maturing in less than a year, have increased about 30% in the past 12 months. The average yield in the category is 0.5%, according to Morningstar, but many of them are yielding more than 1%.
Regards,
Ted
https://www.google.com/#q=Ultrashort+Bond+Funds:+Better+Yields,+Lower+Risk+Barron's
M*: Short-Term Bond Fund Returns:
http://news.morningstar.com/fund-category-returns/short-term-bond/$FOCA$CS.aspx

What a change from 2015 when MSCI index was down 15.4%. So taking the long term view and staying the course would help to invest in this volatile asset class.