Reading Room

Planning  |  Investing  |  Odds and Ends  |  Book Recommendations  |  Blog and News  |  DFA


ReadingRoomMeasuring Temperature with a Ruler.  This whitepaper, from David Loeper (the man who is almost singlehandedly responsible for the much-welcomed growth in “goals-based” investment planning and wealth management), explores the difference between managing returns and managing wealth.

Estimating the True Cost of Retirement. Morningstar’s David Blanchett  looks at how household spending typically changes over the course of retirement, and how it varies depending on a) the household’s spending level at the beginning of retirement and b) how the household’s net worth compares to the spending level in question.

Modern Portfolio Reality: The Failures of Modern Portfolio Theory. Another outstanding whitepaper from Dave Loeper demonstrating the folly of “risk tolerance” as a basis for portfolio management.

The Price Your Clients Pay for Using Sustainable Withdrawal Rates.  In this Advisor Perspectives article, Dave Loeper demonstrates the advantages of a flexible, plan-based retirement withdrawal rate versus the ubiquitous “4% Rule”.  A related video can be seen here.

Estimating the True Cost of Retirement.  Morningstar’s David Blanchett demonstrates that retirement income replacement rates may be lower than the conventional wisdom.

The 4% Rule is Not Safe in a Low-Yield World.  Finke, Pfau and Blanchett propose that “the success of the 4% rule in the U.S. may be an historical anomaly, and clients may wish to consider their retirement income strategies more broadly than relying solely on systematic withdrawals from a volatile portfolio.”


Vanguard’s Principles for Investing Success.  A long but excellent whitepaper which details the 4 most important considerations for investors: Goals, Balance, Cost and Discipline.

The Case for IndexingThis is an excellent whitepaper from the Vanguard Research Group that “explores both the theory underlying index investing and evidence to support its advantages”.

The Case for Indexing II. This is an update (through 2013) demonstrating, once again, that passive funds provide superior expected returns.

Alpha or Wealth.  Investors often assume that “beating the market” (alpha) guarantees greater wealth over time.  It doesn’t, as this article by Sam Bass demonstrates.

The Cross-Section of Expected Stock Returns.  This is the seminal research paper on “Three-Factor” Investing written by Nobel Laureate Eugene Fama and Ken French.  A far less technical review of the research can be found here.

Myths & Misconceptions About Indexing.  This is another excellent whitepaper from the folks at Vanguard which addresses 7 common myths about index investing.

Luck versus Skill in Mutual Fund Performance.  This is a highly technical research paper from Ken French and Eugene Fama (Nobel Laureate) that uses bootstrap simulations vs. actual mutual fund performance data to demonstrate that market-beating performance on the part of active managers is largely due to luck rather than extraordinary skill.

Odds and Ends:

How Much is that Guarantee in the Window?  If you’re thinking about buying a variable annuity, please read this whitepaper by David Loeper first.

Alpha, Beta, and now Gamma.  This article discusses, in rather technical terms, the value of good advice (what the authors refer to as “Gamma”).