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News and Articles
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Handel Architects 401k
12/19/2011
The plan was originally created by our user tigercub. It was approved on 12-19-2011.
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First Pacific Advisors (FPA) Bob Rodriguez: Another Crash Coming
06/08/2011
Robert Rodriguez is the CEO of First Pacific Advisors (FPA). He managed the famed FPA Capital (FPPTX) and FPA New Income (FPNIX). He was twice named Morningstar's fixed-income manager of the year (2001 & 2008).
After taking a one year sabbatical in 2010, he came back to find that the world was still the same: problems that caused the financial crisis in 2008 had not been resolved. Here are some key points he made in a recent Fortune Magazine's article on Rodriguez:
- U.S. debt as a percentage of GDP ratio (currently 64%) is massively underreported because it doesn't count off-balance-sheet entitlements such as Medicare, and debt owed by Fannie and Freddie. If you factor in those liabilities, the ratio will be over 500%!
- The situation isn't irreparable: both parties are not willing to take drastic measures, let alone we are approaching to the election year.
- FPA Capital (FPPTX) is now 30% in cash (he had that before 2008) and 38% in energy sector (XLE). He refused to buy other sectors and even long term or intermediate term bonds (LQD) (TLT), (IEF).
At the end, as what the article stated: " A former Republican, he describes himself as a "fiscal conservative but social moderate" who has grown disgusted with both parties: "I say, 'A pox on both their houses.'""
The following is the chart of FPPTX vs. VFINX (Vanguard 500 Index):
The following is the performance comparison between FPPTX and Six Core Asset ETFs Tactical Asset Allocation Moderate.
Portfolio Performance Comparison
See Here for more detailed comparison.
See Here for another fund FPA Crecent's recent asset allocation analysis.
Symbols: SPY, TLT, XLE, IEF, FPPTX, FPNIX, VFINX
Exchange Tickers: (SPY), (TLT), (XLE), (IEF), (FPPTX), (FPNIX), (VFINX)
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Goldman Sachs Brings Asset Allocation Savvy to Its 401K Plan
06/03/2011
Retirement investing is a long term process. This report reviews The Goldman Sachs 401(k) Plan . We will discuss the investment choices and present the plan rating by MyPlanIQ. Current economic and market conditions are discussed in the context of the investment portfolios in the plan. We will then show how investors in The Goldman Sachs 401(k) Plan can achieve reasonable investment results using asset allocation strategies.
Plan Review and Rating
As one of the largest investment banks in the world, Goldman Sachs (GS) does give its employees ample diversification opportunities. The plan consists of 36 funds. These funds enable participants to gain exposure to 6 major assets: US Equity, Foreign Equity, Commodity, Emerging Market Equity, REITs, Fixed Income.
As of Jun 2, 2011, this plan investment choice is rated as average based on MyPlanIQ Plan Rating methodology that measures the effectiveness of a plan's available investment funds. It has the following detailed ratings:
Diversification -- Rated as great (100%)
Fund Quality -- Rated as below average (14%)
Portfolio Building -- Rated as average (52%)
Overall Rating: average (55%)
It is a bit surprising that the plan's fund quality is rated below average. In the plan, other than the low cost index funds, it provides many Goldman Sachs funds such as Goldman Sachs Asset Management L.P./Structured US Equity Fund (GSELX). This could possibly help your own fund business with the expense of lower qualities. We don't know what cost the plan is charged for these funds.
Current Economic and Market Conditions
As we are clearly entering a seasonally weak period for risk assets, global economies have clearly slowed down. Recently released Case-Shiller housing index showed that the U.S. is now in a double dip state for housing prices. Unemployment rate has been stuck at 9% level. Additional indicators such as conference board consumer confidence index and Chicago ISM index are all pointing to a slow down in the summer season.
Amid a string of bad economic news, risk assets have come down a bit, though they are still ranked high at the moment. Long term treasury bonds, however, have shot up in the anticipation of weakened economy. The following table shows the major asset class ranking in terms of their momentum.
| Assets Class | Symbols | 05/27
Trend
Score | 05/20
Trend
Score | Direction |
| International REITs |
RWX |
11.77% |
10.82% |
^ |
| Commodities |
DBC |
10.84% |
10.32% |
^ |
| US Equity REITs |
VNQ |
10.77% |
10.41% |
^ |
| Gold |
GLD |
9.42% |
10.06% |
v |
| Emerging Market Stks |
VWO |
8.56% |
6.72% |
^ |
| US Stocks |
VTI |
8.29% |
8.23% |
^ |
| International Developed Stks |
EFA |
6.77% |
5.23% |
^ |
| US High Yield Bonds |
JNK |
6.37% |
6.37% |
v |
| International Treasury Bonds |
BWX |
5.96% |
4.66% |
^ |
| Frontier Market Stks |
FRN |
4.05% |
4.27% |
v |
| Emerging Mkt Bonds |
PCY |
3.57% |
4.27% |
v |
| Intermediate Treasuries |
IEF |
2.71% |
2.39% |
^ |
| US Credit Bonds |
CFT |
2.5% |
2.81% |
v |
| Municipal Bonds |
MUB |
2.13% |
2.0% |
^ |
| Total US Bonds |
BND |
1.99% |
1.92% |
^ |
| Mortgage Back Bonds |
MBB |
1.75% |
1.8% |
v |
| Treasury Bills |
SHV |
0.07% |
0.02% |
^ |
Portfolio Discussions
The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies. For comparison purpose, we also include the moderate model portfolios of a typical 6 asset SIB (Simpler Is Better) plan . This SIB plan has the following candidate index funds and their ETFs equivalent:
US Equity: SPY or VTI
Foreign Equity: EFA or VEU
Commodity: DBC
Emerging Market Equity: EEM or VWO
REITs: IYR or VNQ or ICF
Fixed Income: AGG or BND
Performance chart (as of Jun 2, 2011)
Performance table (as of Jun 2, 2011)
From the above table, one can see that the plan is comparable with six core asset benchmark.
To summarize, participants in The Goldman Sachs 401(k) Plan can achieve very reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles. This plan provides adquate diversification but can be improved by working on fund qualities.
Symbols: GS, ^RUT, MLM, VTI, VEU, VWO, VNQ, DBC, BND, STLEX, SVSPX, VUSTX, VIGIX, VIVIX, VIMSX, SSEMX, VIPSX, STLAX, STLBX, WFBIX, STLCX, STLDX, STLFX, GMCFX, GSTGX, WACPX, GSELX, GCMAX, GSHTX, GSCGX, GSLAX, GSFIX, GGOIX, GREIX, QRAAX, PIGLX, SVRIX Exchange Tickers: (GS), (^RUT), (CASH), (MLM), (VTI), (VEU), (VWO), (VNQ), (DBC), (BND), (STLEX), (SVSPX), (VUSTX), (VIGIX), (VIVIX), (VIMSX), (SSEMX), (VIPSX), (STLAX), (STLBX), (WFBIX), (STLCX), (STLDX), (STLFX), (GMCFX), (GSTGX), (WACPX), (GSELX), (GCMAX), (GSHTX), (GSCGX), (GSLAX), (GSFIX), (GGOIX), (GREIX), (QRAAX), (PIGLX), (SVRIX)
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Are Your Credit Scores Calculated Credibly?
06/03/2011
No body knows! Or "Only a handful of employees at the Minneapolis-based Fair Isaac Corp. know and they won’t tell you — or government regulators. Then how do you know you’re getting a fair assessment of your credit practices? You don’t. You have to trust them.", this is from the latest article by John Wasik on Reuters Wealth.
Credit scores, or FICO scores, are widely used to decide your financial charges. Examples are
- Home mortgage applications & interest rates
- Auto loans
- Credit card applications
But only a few people in the world knows the formula to decide the scores? The credit scoring business is closed and opaque. What is the reason not to have a transparent disclosure?
A good analogy is your health conditions: would the medical industry withhold the secret formula to decide how healthy you are? What would happen if they do?
Why is then financial health different?
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How To Guard Against Another Financial Crisis Around The Corner?
05/31/2011
Mark Mobius, executive chairman of Templeton's emerging markets group, has been bullish on emerging markets and in general, was optimistic on emerging market economies. Recently, he has sounded increasingly cautious on global economy.
At a recent gathering, he made the following points:
- Derivatives are not regulated and in fact, they are growing.
- The financial institutions are 'too big to fail'. They are even bigger today than pre-crisis.
- Business as usual, none of causes of the previous crisis has been resolved.
To summarize, Mobius stated that another financial crisis is around the corner. See here for a Bloomberg report.
So how to position your portfolios against the coming crisis (we know there will eventually be one, just don't know when)? The following are several measures to consider:
- Review your portfolio risk level: it is paramount to re-balance your portfolio to a risk level that you are comfortable with. You might want to ask yourself: what happens if the stock markets dropped 20-30% tomorrow? Can you withstand that? How about 40%?
- Diversify, diversify. Though when crisis happens, most likely all risk assets will dive synchronously, no two crisises are the same. Furthermore, it is critical to monitor fixed income, especially long bonds and credit (TED) spread. They can give you some early warnings. Right now, long bonds have risen since the ending of QE2, it is worth to monitor. See our recent SeekingAlpha article on this.
- Follow the economy, let markets tell you: at the moment, the economies have definitely slowed down. Risk assets are still at elevated levels. For now, it is a good idea to monitor major asset movements. MyPlanIQ market overview page lists updated major asset trend scores. When it is called for, one should be prepared to underweight risk asset exposures.
At the moment, hard currency such as Gold (GLD) is somewhat viewed as safe haven, along with U.S. treasury bonds (TLT). Recently, fixed income market has improved due to the series of bad news in economy. Total bond market index ETFs (AGG) (BND) have positive trend scores now.
It is also a good idea to monitor the simplest model portfolios that have six core asset ETFs as candidate funds (SPY) (EFA) (EEM) (IYR) (DBC) (AGG). These portfolios serve as barometers on how diversified and tactical portfolios have behaved recently. See Six Core Asset ETFs plan for more details.
Symbols: SPY, EFA, EEM, IYR, DBC, AGG, TLT, GLD, Portfolio Stategies
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BND Leads US Total Bond ETFs
05/17/2011
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4 Portfolio Risks You Should Be Aware Of
05/17/2011
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50% Workers Say They Don't Save Enough for Their Retirement, EBRI Survey Found
05/11/2011
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Appetite for US High Yield Bonds Remains High as Yields Tighten
05/11/2011
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US Equities Fall as Economic Instability Continues
05/10/2011
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Time for Boomers to Understand What Diversification Brings them
05/10/2011
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GCC Leads Broad Based Commodity ETFs
05/10/2011
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Goldman Sachs Momentum Strategy Kept Simple
05/09/2011
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Emerging Market Small Cap: An investment with High Risk But Rapid Returns
05/05/2011
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US Small Cap Growth ETFs Continue Strong Gains
05/05/2011
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US Large Cap Blend ETFs Return Can Be Beaten As Equity Markets Continue Ascent
05/05/2011
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Emerging Market Bonds Become Important Parts of Many Portfolios
05/04/2011
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XLE The Clear Sector Leader
05/03/2011
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US Intermediate Corporate Bonds Lead By VCIT
05/02/2011
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Aussie Dollar, Swiss Franc and Swedish Kroner Lead the Pack
05/01/2011
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