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The Index Fund Solution A Step-By-Step Investor
The following report compares books using the SERCount Rating (base on the result count from the search engine).
Rating: 3/5 from 1 reviews Evans-Malkiel Book a good primer on indexing | ||||||||||||||||||
This is a good primer on using index funds to build a core portfolio, both with tax-deferred funds, such a 401(k) retirement savings, and taxable funds. The contributions of Evans , an investment advisor, is sandwiched between Professor Malkiel's introduction and closing chapter. It is one of three books I have read recently on the subject. Bogle's 2nd book on Mutual Funds is more technical and Swedloe's book is similar but is more oriented to the Dimensional Fund Advisors (DFA) approach.
The only mention of DFA is to Rex Sinquefield, Co-chair and CIO of DFA whose name is misspelled and whose title is wrong. DFA's enhanced index funds, based on the CRISP indexes are a major omission in the Evans-Malkiel book. Individuals can purchase those funds either if their employer's 401(k) has them available or if they use an advisor who has a relationship with DFA. The DFA 9-10 microcap funds have vastly different characteristics of size and value than the Russell 2000 or Wilshire 4500 index funds.
A few minor quibbles The Sharpe ratio example (p 86) 1.14% should be 1.14
P47 implies that "defined contribution plans" started in 1978. They go back 50+ years earlier to money purchase, profit sharing and stock bonus plans. In addition recent legislation allows employees of non-profits to be covered under 401(k) as well as 403(b) plans.
Evans chapter on taxes might have mentioned federal estate taxes which have a great impact on qualified plan participants with sizable estates. His three recommendations for variable annuities are all more expensive than one he omitted, TIAA-CREF.
Malkiel's final chapter provides an excellent rationale for capitalization weighted indexes as the only practical index-fund alternative, compared to dollar weighted and price weighted. DFA has an interesting approach to foreign indexing involving equal country weighting.
Malkiel, in his recommended portfolios, doesn't mention DFA's products in the large cap, REIT, foreign and small cap areas. While MPT and efficient frontier portfolios may be intellectually satisfying, Bogle and I have some problems with how slavishly one should follow their results.
All in all, this book is a very good starting point.
Conrad M. Siegel FSA, Consulting Actuary