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Most 401(k) Participants Ignore 2Q Volatility
09/09/2010
Howard Stock at BankInvestmentConsultant.com reported that "Retirement plan participants are calming down, according to a Mass Mutual analysis of its plans."
It is further reported that "Only 4% of participants made changes to their 401(k) allocations in the second quarter, despite volatile a S&P 500 Index, which fell 11.4% over that time period."
Mass Mutual stated that "...we have been aggressively communicating with them on the importance of saving consistently and adhering to a long-term investment strategy,”
We concur with what Mass Mutual tried to educate participants, both in terms of savings and a long-term investment strategy. We would further like to point out that, however, a long-term investment strategy that has been sound and conservative. Being conservative and nimble is particularly relevant and important in current uncertain economic situations. Buy and hold asset allocation should be part of an overall portfolio but one should not blindly buy and forget.
... full article ...
labels:investments,401k,IRA,
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How to Tell If You Have a Good 401(k) Plan
08/24/2010
Emily Brandon on US News stated several factors to decide how a 401(k) plan is:
Employer Contributions
Waiting Period
Vesting Schedule
Investment Choices
Plan Costs
Responses to Employee Needs
For practical reasons, participants do not have a choice: the plan is there. It is hard to believe people choose a job solely based on a company's 401(k) plan quality. Certainly, knowing the above factors and then trying to tell your human resources or benefit people to change/improve a plan is one possibility.
But one thing is certain: participants can take care of themselves by doing a better job in terms of evaluating and understanding the available investment choices in a 401(k) plan. Knowing your options and applying a sound investment strategy such as the ones provided by MyPlanIQ is one way. Moreover, making a better decision for rollover your previous 401(k) to current 401(k) or just go directly to IRA (and which brokerage?) could certainly help. That is why MyPlanIQ's PlanRatingIQ can help. We will have more articles on these topics in the coming months.
... full article ...
labels:IRA,401K,Investment,
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Rethinking Gold: What if It Isn't a Commodity After All?
08/23/2010
Jeff Opdyke at Wall Street Journal wrote the following article in the journal's weekend edition. In the article, the author stated that instead of thinking of gold as a commodity, it is more appropriate to view gold as a shadow currency. Here is what the author had to say:
"This won't sit well with some people: Gold isn't a commodity. There. I've said it.
But before you fire off an angry response, hear me out. The facts might change your view of gold's role in a portfolio.
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Instead, "gold is a currency" whose daily price is a gauge of the market's concern about the "potential diminishment" of the purchasing power of the dollar and other paper currencies, says Paul Brodsky, a principal at New York's QB Asset Management.
If he is correct, it is the potential longer-term weakening of the dollar that is the real issue for the gold market, not inflation or deflation."
A couple of key statistics to back up his claims:
1). "I recently asked research firm Ibbotson Associates to run a correlation study to determine how closely inflation and gold-price movements track each other. You would expect gold, as a purported commodity, and inflation to move in tandem.
The data, going back to 1978 and capturing an inflationary spike, shows a correlation of, at most, 0.08."
2). "Going back to 1973—a period that defines the modern, non-gold-backed dollar—the greenback's movements closely track gold's direction. The correlation between month-end gold prices and the Major Currencies Dollar Index, as reported by the Federal Reserve, is minus-0.45.
That clearly is a stronger correlation than you find with inflation. But let's take this a bit further. Let's shorten the time frame to the period from gold's 1980 peak to today.
The result: Over the past 30 years, the correlation between the dollar and gold is minus-0.65—a high negative correlation. It means the dollar and gold are effectively on opposite ends of a seesaw. When the dollar is in favor, gold retreats. When it is under pressure, gold prices swell."
We at MyPlanIQ view Gold could be an asset class on its own. Though we classify Gold as part of commodities asset class, our system will pick up Gold and/or other broad base commodity index if the markets think so. Thus, for a plan with Gold such as GLD as its candidate fund, our tactical asset allocation will have exposure to gold when it sees fit, while still controlling the risk and diversification. We will not go gang buster to put our portfolio entirely in gold but a healthy exposure is good dose of anti dollar weakness and anti inflation.
... full article ...
labels:investment,
Symbols:GLD,
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Young Millionaires Skeptical of Need for Advisors
08/18/2010
Pamela J. Black on BankInvestmentConsultant.com reported that
"Young millionaires doubt the value of financial advisors, according to Spectrem Group.
According to the Chicago-based company’s monthly newsletter, millionaires under the age of 45 say that they prefer self-directed investing and they find the services of a professional advisor to be too expensive.
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Spectrem recommended that advisors do three things to attract younger millionaires: Provide information about both high- and low-risk investments since young millionaires want to protect their wealth and grow it; invest in online applications; and provide in-depth technical information in articles on your website."
It is not surprising to us to read such a report: for persons who have time and skills to learn and manage, MyPlanIQ strives to provide wealth of information and an effective system to bridge the existing gap. However, some advisors do provide value added in terms of personal tailored information and advice.
Full story.
labels:investment,
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PlanRatingIQ Rates Effectiveness of Plan Investment Choices
08/17/2010
MyPlanIQ recently released Plan Investment Choices PlanRatingIQ to help gauge quality of investment choices provided in vast retirement IRA, 401K, 403B, 457 plans, variable annuities, variable universal life and college savings 529 plans. Unlike other services, PlanRatingIQ looks at it from the participant’s viewpoint – what returns they could achieve with the plan.
This is a significant step forward in order to help many participants evaluate various plans so as to better position and manage their investment portfolios. Returns is what they care about. Good returns are derived from minimizing the various fees charged and ensuring high quality investment choices.
MyPlanIQ Plan Investment Choices PlanRatingIQ uses the following rigorous methodology:
Step 1: Evaluate investment fund menu in the following three key categories and derive relative scores in each category:
- Fund Quality: MyPlanIQ uses fund risk adjusted returns to derive a score for each fund available and derive a combined score in this category.
- Diversification: MyPlanIQ measures how the available funds represent major asset classes including the following: U.S. Equity, International Equity, Emerging Market Equity, Real Estate Investment Trusts (REIT, both U.S. and International), Commodities, Fixed Income (both U.S. and International). In addition, minor asset classes such as high yield bonds, various maturity treasury bonds and large/mid/small cap stocks are measured.
- Portfolio building: In addition to the above two categories, it has been found that correlation of funds in various market conditions plays a critical role in portfolio return and risk. For example, a stock fund that invests mainly in high quality large cap stocks may behave differently from a stock fund that invests in volatile low quality small cap stocks in a bear market or a rising bull market. In addition to asset classes diversification, such correlation can affect a portfolio performance in a meaningful way. Extensive simulation using MyPlanIQ portfolio simulation capability is performed to derive a relative score in this category.
Step 2: Combine the scores in these three categories to arrive an overall rating score by assigning proper weights to scores in the categories.
PlanRatingIQ adds a critical component to today’s mostly fee and policy based 401K plan ratings such as BrightScope’s 401K rating: for plan participants, the most important factor, after all fee and company benefit considerations, is how to derive most investment returns out of a given investment menu in a plan. It helps plan participants and investors alike to evaluate and improve investment funds selected by a provider. Combined with MyPlanIQ’s investment model portfolios based on time proven asset allocation strategies, investors now have a suite of tools to manage their day to day investments.
The following are some applications of PlanRatingIQ for plan participants:
- Evaluate a plan’s investment menu design among many 401K plans they have had for various jobs held. This will help them to decide whether to rollover an existing 401K plan to a new 401K plan of a company currently they have a job at.
- Evaluate whether it is worth to roll over from an existing 401K or IRA to another IRA in a brokerage.
- Help investors to choose the best plans among available plans: this is especially true for many ETF based IRA/taxable brokerage plans MyPlanIQ supports. Those ETF plans are either MyPlanIQ SIB (Simpler Is Better) plans or lazy portfolio based plans proposed by investment gurus.
- Evaluate multiple plan choices an organization sometimes provides. This is especially true for a non-profit organization such as a public employer (ex. state universities or city/county governments).
- Many times, investors are presented by brokers with various variable annuities. Investors had to rely on their intuition and experience to evaluate these plans and sometimes made random choices. Now, investors can utilize PlanRatingIQ to evaluate and choose a variable annuity with better investment choices.
- Evaluate and compare how a company’s plan performs among its peers in a same industry, region or even national wide.
For plan providers, PlanRatingIQ helps to evaluate an existing plan investment choices and further improve the design of a plan.
As of today, among thousands plans in MyPlanIQ database, the following are the top 20 plans based on PlanRatingIQ.
The following is the list of ETF plans ranking.
labels:retirement,IRA,401K,ETFs,
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Fund Expenses More Important than Five-Star Status
08/11/2010
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Products of the Pros: Index Funds
08/11/2010
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Should I max out my 401k?
08/11/2010
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Schwab Announces Three New Bond ETFs
08/06/2010
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Employers Slow to Reinstate 401K Matching
08/05/2010
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Target Date Funds
08/05/2010
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Making the Most of Your Old 401(k)s?
08/02/2010
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Cheaper Choice in 401(k)s
08/02/2010
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A 'Dilbert' Guide to Funds
08/02/2010
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Calculating how much you need for retirement
07/30/2010
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Worried about A Double-Dip
07/30/2010
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Practical and Effective ETF Based 401K Plan
07/29/2010
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Avoid 401K Rollover Mistakes
07/28/2010
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Retirement Blunders
07/28/2010
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5 Problems With Mutual Fund Past Performance
07/28/2010