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Harry M. Markowitz explains Portfolio Theory: what it is and how it's used from a top-down model from the asset classes to the investments. He covers Standard Deviation, Variance, Correlation, and Covariance. Markowitz also explains what happened in 2008 with Modern Portfolio Theory. (39 Min.)

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Harry Markowitz - Portfolio Theory Vs. Financial Engineering, and Their Roles in Financial Crises

The first step on the index funds journey is to recognize active investor behavior. If all investors were lined up in a row, could the active investors be identified? Active investors actively engage in stock picking, time picking (market timing), manager picking, and style picking.

Step 1: Active Investors - Podcast Interview with Mark Hebner

Mark Hebner explains the Nobel Laureates. Mark suggests a higher power of non-biased information from academics who carefully analyze data and have that data peer reviewed before it is published. Mark identifies the five basic concepts of the Modern Portfolio Theory.

Step 2: Nobel Laureates - Podcast Interview with Mark Hebner

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Magellan Finally Dethroned

IndexFunds.com Staff
Thursday, April 06, 2000

The eclipse was predicted for years. Finally on April 5 Vanguard 500 became the largest fund in the world with $107.2 billion in assets, surpassing Fidelity's Magellan Fund at $106.9 billion, according to fidelityinvestor.com.

The event is seen by many as confirmation that indexing will continue to gain market share at the expense of actively managed funds. An estimated 40% of cash inflows to mutual funds is being placed in index funds.

One factor hampering Magellan's growth was the closing of its doors to most new investors in September 1997. Critics have claimed it is too large to attempt to outmaneuver the market. Such a large fund, many feel, must inevitably drive up share prices of companies during the buying process and drive down prices during the selling process. Since Vanguard 500 buys smaller amounts of shares across across a larger number of firms, it is considered far less likely to drive shares up or down during buying and selling.

IndexFunds.com Staff

 


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