Malkiel was a board member of Vanguard for decades and Vivian moved IBM’s retirement assets to index funds. So, it's no wonder that the Rebalance IRA committee picks a variety of index funds to execute their allocation strategies.
“We take a more flexible approach relative to an ultra-orthodox view of Vanguard indexing in terms of asset allocation,” said Tuchman. “In global equities, we've integrated factors like Fama-French research by adding a small cap tilt.”
The Fama and French Three Factor Model is an asset pricing model that expands on the Capital Asset Pricing Model (CAPM) by adding size and value factors to the market risk factor in CAPM.
Without customizing individual portfolios, about 99 percent of Rebalance IRA accounts are driven off of models that the investment committee builds, monitors and tweaks.
“We review fees and how an asset class is indexed before selecting an index fund to add to our model portfolios,” Tuchman said.
The committee also determines which asset classes to use, the specific index for that asset class and then the right ETFs to gain exposure.
“We're all indexers,” Tuchman said.