Tilted Indexing

Making the Markets Work For You.

There are three primary investment strategies for institutions and individuals to consider managing their capital with; Active Management (the riskiest methodology with the highest percentage of failure to beat benchmarks), Passive Investing (index funds from firms like Vanguard or Fidelity that mirror the markets and perform at their benchmarks minus very small fees) and Tilted Index Investing, otherwise known as Active Index Investing (index funds that “tilt” holdings according to the Fama-French Three Factor Models: capturing the maximum market “dimensions of higher expected returns” with the same low risk and fee profile as index funds). In 1980 Dimensional Fund Advisors created DFA Tilted Index Mutual Funds that outperforms its respective indexes over time.


The fundamentals of the DFA funds are based on the Fama-French Three Factor Model. The basic tenets are astoundingly simple and powerful:


Efficient Market Theory: all the information that is available in the universe about a stock is in the price of that stock each day. This is a simple yet misunderstood fact. The underlying principle is that no one investor is smarter that the collective intelligence of all other investors. The best assessment of the value of a stock is in its present price.

Value outperforms Growth 100% Over Time: research performed by economists at the University of Chicago have proven that throughout any 20 year period since 1926 value stocks have outperformed growth stock 100% of the time. This is irrefutable and a fact that Wall Street firms conceal from the broad market.

Small Outperforms Large 98.7% Over Time: research performed by economists at the University of Chicago have proven that throughout any 20 year period since 1926 small stocks have outperformed large stock 98.7% of the time. This is irrefutable and a fact that Wall Street firms conceal from the broad market.

With absolute and complete dedication to our clients’ best interests, CJM Wealth follows the Fama-French Three Factor Investment Model. It holds that a portfolio’s long-term expected return is influenced and determined by the three risk factors mentioned above: the amount of stocks vs. bonds in a portfolio; the size bias of the portfolio; and the portfolio’s allocation toward “value” vs. expensive growth stocks. This model is applied as part of CJM Wealth’s structured investment approach of “Tilted Indexing.”

These “dimensions” of the market are the basis for the creation of Dimensional Fund Advisors and an opportunity for institutions and individuals to capture all the returns the market has to deliver without taking any additional risks associated with active management. The Fama-French Three Factor Model serves as a virtual “financial emancipation proclamation,” applying the modern ideas of finance directly on behalf of client portfolios.

The investment community and media covering Wall Street would have investors believing in active managers,who pursue “hot stocks” with their “super traders” who have a Midas touch when it comes to picking stocks and timing the market. This has always been a fallacy and the riskiest strategy with which to manage wealth. Less that 10% of active managers outperform their own benchmarks. Over 90% failure rate.

CJM Wealth Management knows the myths perpetuated by Wall Street — based on nothing more than a powerful industry focus to making money at the expense of their clients on behalf of their own shareholders. CJM Wealth was created as a remedy in response to that unfair advantage.

Not to be confused with “active management” marked by overtrading/churning with high transactional costs to the client, nor a “passive” approach, Tilted Indexing follows the underlying theory that:

While the markets are efficient and hard to beat, they can be engaged to capture market-beating returns. By leveraging the systematic performance of broad market dimensions and applying strategic trading strategies, the best returns of any given asset class can be achieved. CJM’s tilted indexing is shaped by its market intelligence as to whether conditions are good and the most favorable prices can be secured.

CJM Wealth’s Tilted Indexing reflects:

• Diversification– spreading risk with and across broad asset classes in order to capture the full benefit of all the sectors with less volatility

• Asset class allocation – purchasing every security in an asset class to gain the advantage of “buying and holding” versus panic transactions based on individual securities’ volatility

• Rebalancing – selling assets that have risen in value and buying more assets that dropped in value to position a portfolio back to its original target allocation to relieve volatility and restore the portfolio’s structural integrity based on the investor’s long-term goals

Using Tilted Indexing, CJM Wealth adds value to its clients’ wealth by maintaining portfolios that focus on achieving higher expected returns cost-effectively and without compromising their long-term financial goals.

Let CJM Wealth leverage its Tilted Indexing to add value, reduce volatility, and focus on achieving higher expected returns cost-effectively while maintaining your portfolio’s integrity. Contact us at: 631.777.1030 or email: Diane@CJMWealth.com

Tilted Indexing

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