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News and Articles
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Calling All Boomers -- Poor Asset Allocation Could Be Costing You Big
03/03/2011
There is a serious crisis highlighted by national and international media that upcoming retirees don't have the savings they will need. Their plans have been blighted by the recent financial melt-down and they are left with a hole that they have to fill somehow.
In a study of over 800 mainly retirement plans, we noted that the majority of plans supported only three asset classes which is going to have a significant impact on the potential returns for the participant.
| Asset Classes |
Number of plans |
| Three |
463 |
| Four |
181 |
| Five |
109 |
| Six |
30 |
To make this clear, we are going to use a simple benchmark vehicle -- SIB -- simpler is better to show the potential difference in returns between the portfolios with different numbers of asset classes.
Each of the SIBs are built from one ETF per asset class. The ETFs we selected for these portfolios are as follows:
| Asset Class | Ticker | Name |
| LARGE BLEND |
VTI |
Vanguard Total Stock Market ETF |
| Foreign Large Blend |
VEU |
Vanguard FTSE All-World ex-US ETF |
| DIVERSIFIED EMERGING MKTS |
VWO |
Vanguard Emerging Markets Stock ETF |
| REAL ESTATE |
VNQ |
Vanguard REIT Index ETF |
| COMMODITIES BROAD BASKET |
DBC |
PowerShares DB Commodity Idx Trking Fund |
| Intermediate-Term Bond |
BND |
Vanguard Total Bond Market ETF |
So the three asset SIB has VTI, VEU and BND. The four asset SIB adds emerging markets. The five asset SIB adds Real Estate. The six asset SIB adds commodities.
Over the next set of articles, we are going to examine the differences between the portfolios and why the additional asset class makes a contribution to increasing return potential and lowering risk.
The three asset portfolio is really old school. The world comprises the US and the rest. US equities are enough of a microcosm that I can find enough diversification to give me protection against certain segments of the markets declining. Even if that does happen, I have fixed income and international equities to bail me out. We know that this is no longer the case. We can see on our browsers how the DOW, FTSE and NIKKEI act as if they are the same index, just on a different timezone. With a three asset portfolio, you really have very limited diversification.
Adding emerging markets does give you a completely different asset
Performance chart (as of Mar 1, 2011)
Performance table (as of Mar 1, 2011)
We note from this that applying a tactical asset allocation strategy with three asset classes and funds is of limited value. Tactical asset allocation relies on having other asset classes that are not correlated so that when one asset class is under performing, another one becomes a hedge and rises to compensate. However, with an additional asset class, you are able to more than double returns over the longer time horizon. This is a significant jump and over a decade this puts 60% more money in your pocket.
Emerging markets are going to play a larger and larger part in our lives as countries such as China and India are increasingly powerful. We have already seen how these nations have sprung back from the great recession and are leading the recovery. This is an important part of any portfolio and if you want to know how to better your chances of a better retirement, now you know.
How can you do this if your plan only supports three asset classes? If you have an IRA, overweight the missing asset class (or two) in the IRA to compensate and create a more balanced portfolio that can deliver higher returns and lower risk.
Disclosure:
MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
Symbols:VTI,VEU,BND,VNQ,VWO,DBC,
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Resorting to Managed Bond Funds For The Morningstar 401K ETF Clone
03/02/2011
MS ETF Clone with PTTRX We are in the process of trying to replicate the performance of the Morningstar 401K plan with ETFs. We identified two weaknesses in the ETF portfolio -- international equity and fixed income. In the last article we dealt with the international equity portion and now we deal with fixed income.
We reviewed performance for each of the funds that are coupled together by sub-class type.
| Ticker |
Name |
5 year AR (%) |
3 year AR (%) |
1 year AR (%) |
ETF Score |
Mu Fund Score |
| JNK |
SPDR Barclays Capital High Yield Bond |
4.15 |
6.89 |
11.89 |
35% |
|
| PHIYX |
PIMCO High Yield Instl |
5.51 |
6.10 |
7.11 |
|
33% |
| PRRIX |
PIMCO Real Return Instl |
5.40 |
4.34 |
5.44 |
|
28% |
| TIP |
iShares Barclays TIPS Bond |
4.10 |
2.46 |
4.06 |
20% |
|
| AGG |
iShares Barclays Aggregate Bond |
5.28 |
5.05 |
3.76 |
27% |
|
| PTTRX |
PIMCO Total Return Instl |
8.07 |
8.64 |
6.61 |
|
44% |
| GVI |
iShares Barclays Interm Govt/Credit |
|
5.47 |
5.11 |
13% |
|
| LSBDX |
Loomis Sayles Bond Instl |
6.35 |
4.82 |
8.32 |
|
35% |
| PRWBX |
STABLEVALUE |
3.96 |
3.07 |
(0.21) |
|
16% |
| SHY |
iShares Barclays 1-3 Year Treasury |
3.65 |
1.99 |
1.07 |
15% |
|
| BSV |
Vanguard Short-Term Bond ETF |
|
1.08 |
0.90 |
3% |
|
| VBISX |
Vanguard Short-Term Bond Index Inv |
4.36 |
2.87 |
0.10 |
|
17% |
We can see that in the fixed income sub-classes, the high yield bonds (JNK and PHIYX) and short term treasury (SHY, PRWBX) run neck and neck. There is a fair gap in the inflation protected bonds (TIP and PRRIX) but the biggest gaps are in the short term bonds (BSV, VBISX), intermediate bonds (AGG, PTTRX) and multi-sector bonds (GVI, LSBDX).
We will look at these last three biggest culprits.
If we consider short term bonds, the problem is that the ETFs are all very new. It might be worth swappin in VCSH going forward but there just isn't enough history yet so this is a watching brief to see how they perform:
| Ticker |
Name |
5 year AR (%) |
3 year AR (%) |
1 year AR (%) |
Score |
| VBISX |
Vanguard Short-Term Bond Index Inv |
4.4% |
2.9% |
0.1% |
17% |
| CSJ |
iShares Barclays 1-3 Year Cred |
|
3.2% |
2.1% |
7% |
| VCSH |
Vanguard Short-Term Corp Bd Id |
|
|
3.7% |
4% |
| SCPB |
SPDR Barclays Capital Short Term |
|
|
3.0% |
3% |
If we now look at the multi-sector bonds
| Ticker |
Name |
5 year AR (%) |
3 year AR (%) |
1 year AR (%) |
Score |
| LSBDX |
Loomis Sayles Bond Instl |
6.4% |
4.8% |
8.3% |
34.6% |
| AGG |
iShares Barclays Aggregate Bon |
5.3% |
5.3% |
3.8% |
27.7% |
| BND |
Vanguard Total Bond Market ETF |
|
2.0% |
2.3% |
5.3% |
| BIV |
Vanguard Intermediate-Term Bon |
|
2.4% |
3.8% |
7.5% |
| PCEF |
PowerShares Income Composite |
|
|
9.7% |
9.7% |
We are again plagued with short histories and AGG performs reasonably well -- however AGG is used to match PTTRX. Some of the newer ETFs may give better alternatives in future but there is nothing that closes the gap.
PTTRX has been a staple in many portfolios and has continued to do an outstanding job of delivering consistently high returns. Again, the ETF selections lack much history although there are some promising alternatives.
| Ticker |
Name |
5 year AR (%) |
3 year AR (%) |
1 year AR (%) |
Score |
| PTTRX |
PIMCO Total Return Instl |
8.1% |
8.6% |
6.6% |
44% |
| ITR |
SPDR Barclays Cap Interm Term |
|
|
6.2% |
6% |
| VCIT |
Vanguard Interm-Tm Corp Bd Idx |
|
|
7.7% |
8% |
| CFT |
iShares Barclays Credit Bond |
|
5.1% |
5.5% |
13% |
| CIU |
iShares Barclays Intermediate |
|
4.8% |
4.8% |
12% |
| CORP |
PIMCO Investment Grade Corp Bd |
|
|
|
0% |
Given this background, we decided to insert the retail version of PTTRX and LSBDX -- PTTDX and LSBRX and deal with the additional fees and redemption periods. We can go back and further optimize the other fixed income but this was a big enough change that we thought we would see how it turned out.
Performance chart (as of Feb 28, 2011)
Performance table (as of Feb 28, 2011)
We can see that the addition of the managed bond funds does give us a point or two of additional returns. It is important to note that this is slightly higher during the downturn when fixed income becomes even more of a focus.
If we now compare this with the original Morningstar portfolio, we can see that we have closed the gap to a large degree. Remember that the ETFs are newer and so the simulation can only put the money into cash when the ETFs don't exist.
Performance chart (as of Mar 1, 2011)
Performance table (as of Mar 1, 2011)
We notice that the original portfolio has performed better with TAA in the short term but over the longer time horizons, the perfomances are much closer.
There is a danger that this is considered returns chasing -- that we are bulding a portfolio based on history and not forward looking and there is some justification to that charge. In particular, more attention could be given to some of the newer fixed income ETFs as they build history. A reasonable middle ground seems to be to either add the new funds and allow styles rotation to bring them in when merited or to wait another year and see what the historical trail looks like.
Disclosure:
MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
AGG , AOM , BIV, BND, BRWIX , BSV , CFT, CISIX , CIU, CORP, CSJ, DBC , EFA, EFG, EFV , EWX , FSLBX , GVI , HACAX , IDV, ITR, IWP , IWV , JNK , LSBDX , MGK , NEWFX , OAKMX , ODVYX , OTCFX , PCEF, PCRIX , PHIYX , PID, PIZ, POAGX , PRRIX , PRWBX , PSVIX , PTTRX , REFDX , RWMFX , SCHF, SCPB, SHY , SLASX , TBGVX , TIP , VASVX , VB , VBISX , VBR , VCIT, VCSH, VEA , VGSTX , VIG , VINIX , VNQ , VOE , VOT , VTI , VTV , VUG , VWILX , VWO , XLF,
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Replacing VEA and EFV with PID, PIZ Boosts Morningstar Clone Across the Board
03/01/2011
In a previous article we looked at how the ETFs compared with managed funds available in the Morningstar 401K plan – we are using this as an excellent example of a plan with a reasonable number of funds that can still deliver a portfolio with good returns.
We summarized the differences between the ETF clone and the original by creating a score for each fund and then summing them up by major asset class. This gave us the following table:
|
Asset Class
|
ETF Score
|
Mutul Fund Score
|
Delta
|
|
US Equities
|
420%
|
422%
|
0%
|
|
International Equities
|
17%
|
56%
|
228%
|
|
Emerging Markets
|
62%
|
46%
|
-26%
|
|
Real Estate
|
43%
|
45%
|
4%
|
|
Commodities
|
31%
|
15%
|
-52%
|
|
Fixed Income
|
107%
|
173%
|
62%
|
We noted that the two areas of biggest concern were the international equities and the fixed income. We speculated that it might well be difficult to emulate the managed fixed income performance delivered by two of the leading companies in that area PIMCO and Loomis Sayles.
In this article, we start by reviewing the international equities class to see if we can close the gap between the clone and the original. We recognize that this might be considered cherry picking in the sense that we are using historical returns that may not be reflected going forward. Nevertheless, the exercise will be instructive, even if only to show where it can be dangerous to just chase returns.
With international equity, the current funds are:
|
Ticker
|
Description
|
5 year AR (%)
|
3 year AR (%)
|
1 year AR (%)
|
ETF Score
|
Mfund Score
|
|
VEA
|
Vanguard Europe Pacific ETF
|
|
(2.68)
|
17.45
|
13%
|
|
|
VWILX
|
Vanguard International Growth Adm
|
4.04
|
(1.26)
|
21.65
|
|
32%
|
|
EFV
|
iShares MSCI EAFE Value Index
|
(0.66)
|
(4.69)
|
12.77
|
4%
|
|
|
TBGVX
|
TweedyBrowne Global Value
|
2.87
|
1.38
|
13.75
|
|
24%
|
|
|
|
|
|
|
|
When we looked at the alternative ETFs, we reduced it to the following choices:
There are some intriguing choices and as time goes on, there will be increasing numbers with more established history.
· We chose PID because of strong returns and because dividend ETFs go for solid companies and in the current environment, that is a sound choice
· We chose PID because of its strong results. There is something of risk because of the shorter history but we selected it nevertheless
When we swap out VEA and EFV for PID and PIZ, we see the following historical behavior
Performance chart (as of Feb 28, 2011)
![]()
Performance table (as of Feb 28, 2011)
As we mentioned earlier, it is important not to fall into the trap of just chasing returns and we note that over the longer time horizons, this switch has degraded returns for the strategic asset allocation.
However, we note that this has bumped tactical asset allocation across the board.
In the next article, we will look at the impact of fixed income.
Disclosure:
MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
Symbols:EFA,IDV,SCHF,PID,EFG,PIZ,EFV,VEA,
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Commodities Showed Their Hedge Amid Equity Weakness
02/28/2011
Last week, all major global stock markets registered loss: Frontier stocks (FRN) lost most -- -2.6%, followed by Emerging market stocks (VWO) -- -1.89%, and U.S. stock markets (VTI) -- -1.73%. REITs also showed their weakness. Commodities, however, showed their hedging nature, gaining 3.42%. Gold (GLD) gained 1.46%. Other fixed income ETFs all had positive gains too. For more detailed performence update, please refer to here.
The following table shows the trend scores for all major asset classes we monitor.
| Assets Class | Symbols | 02/25
Trend
Score | 02/18
Trend
Score | Direction |
| Commodities |
DBC |
16.74% |
13.62% |
^ |
| US Stocks |
VTI |
13.05% |
14.82% |
v |
| US Equity REITs |
VNQ |
12.41% |
14.34% |
v |
| International REITs |
RWX |
11.37% |
11.76% |
v |
| Gold |
GLD |
9.84% |
8.93% |
^ |
| International Developed Stks |
EFA |
9.77% |
10.71% |
v |
| Emerging Market Stks |
VWO |
7.08% |
7.87% |
v |
| US High Yield Bonds |
JNK |
5.55% |
5.5% |
^ |
| International Treasury Bonds |
BWX |
2.85% |
2.86% |
v |
| Frontier Market Stks |
FRN |
1.08% |
2.41% |
v |
| US Credit Bonds |
CFT |
0.76% |
0.38% |
^ |
| Emerging Mkt Bonds |
PCY |
0.07% |
-0.07% |
^ |
| Treasury Bills |
SHV |
0.03% |
0.01% |
^ |
| Total US Bonds |
BND |
-0.04% |
-0.49% |
^ |
| Intermediate Treasuries |
IEF |
-0.52% |
-1.33% |
^ |
| Municipal Bonds |
MUB |
-1.08% |
-1.17% |
^ |
| Mortgage Back Bonds |
MBB |
-1.21% |
-1.51% |
^ |
The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).
We pointed out the role of commodities in asset allocation of a portfolio several months ago. The following table shows the performance of two portfolios using a tactical asset allocation strategy: one has five core asset classes, eash of which is represetned by a single ETF, as its candidate funds: U.S. equity (VTI, SPY), Foreign equity (VEU, EFA), Emerging market equity (VWO, EEM), U.S. REITs (IYR, VNQ) and fixed income (BND, AGG). The other has six core assets that includes an additional commodity index ETF (DBC) as its sixth asset.
The following table compares the performance of two moderate portfolios for these two plans.
It is clear that adding commodity as a candidate asset for an asset allocation strategy does increase the return and Sharpe ratio (thus, risk adjusted return). However, to achieve this, one should follow a systematic asset allocation strategy like the one mentioned above and handle commodity and other asset classse exposures carefully.
Disclosure:
MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
Symbols: EEM,VNQ,FRN,VWO,IYR,ICF,GLD,RWX,VTI,SPY,IWM,PCY,EMB,JNK,HYG,PHB,EFA,VEU,IEF,TLT,GSG,DBC,DBA,CFT,BWX,MBB,BND,MUB,SHV,AGG,
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Morningstar's 401K Clone Begs the Question- What about Managed Funds?
02/27/2011
We have already examined the Morningstar 401K plan. We explained why it is a model of plan creation - providing a manageable number of funds with broad asset class exposure that enables portfolios that can deliver solid returns. We also provided an ETF clone which enabled portfolios that underperformed the original.
Performance chart (as of Feb 25, 2011)
![]()
Performance table (as of Feb 25, 2011)
The chart is a little misleading as the ETF Clone has fewer choices until recently because of the newness of the ETF funds. If we look at the table and consider just the five year return figures we can see that the strategic asset allocation returns are similar but there is an additional 3% garnered from the original.
This has prompted further analysis of the funds which we present here.
We tracked returns for all of the funds used in each portfolio over 5, 3 and 1 years. Some of the ETFs are sufficiently new that there wasn't five year data. We then created a score which was the summation of the five year number multiplied by three, the three year number multiplied by 1.5 and the one year number.
|
|
Name
|
5 year AR (%)
|
3 year AR (%)
|
1 year AR (%)
|
ETF Score
|
Mu Fund Score
|
|
DBC
|
PowerShares DB Commodity Index Tracking
|
5.97
|
(4.76)
|
20.50
|
31%
|
|
|
PCRIX
|
PIMCO Commodity Real Ret Strat Instl
|
2.32
|
(8.45)
|
20.85
|
|
15%
|
|
EWX
|
SPDR S&P Emerging Markets Small Cap
|
8.69
|
(0.04)
|
18.93
|
45%
|
|
|
NEWFX
|
American Funds New World A
|
8.29
|
(0.21)
|
17.00
|
|
42%
|
|
ODVYX
|
Oppenheimer Developing Markets Y
|
(2.86)
|
(7.95)
|
25.22
|
|
5%
|
|
VWO
|
Vanguard Emerging Markets Stock ETF
|
|
|
17.45
|
17%
|
|
|
JNK
|
SPDR Barclays Capital High Yield Bond
|
4.15
|
6.89
|
11.89
|
35%
|
|
|
PHIYX
|
PIMCO High Yield Instl
|
5.51
|
6.10
|
7.11
|
|
33%
|
|
PRRIX
|
PIMCO Real Return Instl
|
5.40
|
4.34
|
5.44
|
|
28%
|
|
TIP
|
iShares Barclays TIPS Bond
|
4.10
|
2.46
|
4.06
|
20%
|
|
|
AGG
|
iShares Barclays Aggregate Bond
|
5.28
|
5.05
|
3.76
|
27%
|
|
|
PTTRX
|
PIMCO Total Return Instl
|
8.07
|
8.64
|
6.61
|
|
44%
|
|
GVI
|
iShares Barclays Interm Govt/Credit Bond
|
|
3.12
|
2.53
|
7%
|
|
|
LSBDX
|
Loomis Sayles Bond Instl
|
6.35
|
4.82
|
8.32
|
|
35%
|
|
PRWBX
|
STABLEVALUE
|
3.96
|
3.07
|
(0.21)
|
|
16%
|
|
SHY
|
iShares Barclays 1-3 Year Treasury Bond
|
3.65
|
1.99
|
1.07
|
15%
|
|
|
BSV
|
Vanguard Short-Term Bond ETF
|
|
1.08
|
0.90
|
3%
|
|
|
VBISX
|
Vanguard Short-Term Bond Index Inv
|
4.36
|
2.87
|
0.10
|
|
17%
|
|
VEA
|
Vanguard Europe Pacific ETF
|
|
(2.68)
|
17.45
|
13%
|
|
|
VWILX
|
Vanguard International Growth Adm
|
4.04
|
(1.26)
|
21.65
|
|
32%
|
|
EFV
|
iShares MSCI EAFE Value Index
|
(0.66)
|
(4.69)
|
12.77
|
4%
|
|
|
TBGVX
|
TweedyBrowne Global Value
|
2.87
|
1.38
|
13.75
|
|
24%
|
|
REFDX
|
Morgan Stanley Real Estate I
|
2.55
|
2.13
|
34.01
|
|
45%
|
|
VNQ
|
Vanguard REIT Index ETF
|
2.09
|
2.26
|
33.32
|
43%
|
|
|
FSLBX
|
Fidelity Select Brokerage & Invmt Mgmt
|
(1.09)
|
(1.28)
|
15.23
|
10%
|
|
|
XLF
|
Financial Select Sector SPDR
|
(10.63)
|
(12.91)
|
15.61
|
|
-36%
|
|
IWV
|
iShares Russell 3000 Index
|
1.91
|
1.28
|
21.97
|
30%
|
|
|
OAKMX
|
Oakmark I
|
4.75
|
5.85
|
17.86
|
|
41%
|
|
SLASX
|
Selected American Shares S
|
1.35
|
(1.68)
|
15.91
|
|
17%
|
|
VIG
|
Vanguard Dividend Appreciation ETF
|
|
3.37
|
18.54
|
24%
|
|
|
VINIX
|
Vanguard Institutional Index Instl
|
2.11
|
0.16
|
19.63
|
|
26%
|
|
VTI
|
Vanguard Total Stock Market ETF
|
2.57
|
1.55
|
23.38
|
33%
|
|
|
CISIX
|
Calvert Social Index I
|
1.71
|
1.66
|
23.25
|
|
31%
|
|
HACAX
|
Harbor Capital Appreciation Instl
|
3.15
|
4.35
|
20.33
|
|
36%
|
|
MGK
|
Vanguard Mega Cap 300 Gr Index ETF
|
|
3.25
|
23.65
|
29%
|
|
|
VUG
|
Vanguard Growth ETF
|
3.25
|
2.33
|
22.48
|
36%
|
|
|
RWMFX
|
American Funds Washington Mutual R5
|
1.68
|
(1.10)
|
16.74
|
|
20%
|
|
VTV
|
Vanguard Value ETF
|
2.03
|
(0.60)
|
19.16
|
24%
|
|
|
BRWIX
|
Brandywine
|
1.16
|
(3.55)
|
36.42
|
|
35%
|
|
IWP
|
iShares Russell Midcap Growth Index
|
4.55
|
5.27
|
38.04
|
60%
|
|
|
POAGX
|
PRIMECAP Odyssey Aggressive Growth
|
6.64
|
9.56
|
18.72
|
|
53%
|
|
VOT
|
Vanguard Mid-Cap Growth ETF
|
|
3.45
|
36.71
|
42%
|
|
|
VASVX
|
Vanguard Selected Value Inv
|
4.65
|
4.17
|
23.07
|
|
43%
|
|
VOE
|
Vanguard Mid-Cap Value ETF
|
|
3.77
|
23.68
|
29%
|
|
|
AOM
|
iShares S&P Moderate Allocation
|
|
|
9.73
|
10%
|
|
|
VGSTX
|
Vanguard STAR Inv
|
3.61
|
2.57
|
12.85
|
|
28%
|
|
OTCFX
|
T. Rowe Price Small-Cap Stock
|
5.52
|
10.67
|
38.04
|
|
71%
|
|
VB
|
Vanguard Small Cap ETF
|
4.14
|
6.49
|
31.92
|
54%
|
|
|
PSVIX
|
Allianz NFJ Small Cap Value Instl
|
6.67
|
5.67
|
28.03
|
|
57%
|
|
VBR
|
Vanguard Small Cap Value ETF
|
2.50
|
4.42
|
25.69
|
40%
|
|
Instead of looking at each fund individually, we added the scores in each of the major asset classes together:
|
Asset Class
|
ETF Score
|
Mutual Fund Score
|
MF/ETF
Delta
|
|
US Equities
|
4.20
|
4.22
|
0%
|
|
International Equities
|
0.17
|
0.56
|
228%
|
|
Emerging Markets
|
0.62
|
0.46
|
-26%
|
|
Real Estate
|
0.43
|
0.45
|
4%
|
|
Commodities
|
0.31
|
0.15
|
-52%
|
|
Fixed Income
|
1.07
|
1.73
|
62%
|
This gives us some insight on the different portfolios.
- US equity returns are running neck and neck - indicating that to improve the returns of the ETF portfolio, looking at the US equities should only be undertaken when the other asset classes have been examined
- There is a significant gap in the international equities. The Vanguard Europe Pacific ETF looks like it will help but this is an area for shoring up the ETF portfolio
- The Emerging Market ETF outperforms the original so, while it may be better to improve performance, that is a secondary task
- Real estate runs neck and neck so look at that later
- Commodities, the ETFs are running ahead so, again, we can look at that later
- Fixed income is probably the biggest area where the difference is explained. It is the largest single asset category in terms of funds invested (in most cases) and there is a significant difference between the two. The original plan has two of the leading managed fixed income funds which shows consistently higher performance.
The takeaway is that to look to improve returns from the Clone ETF, focus needs to be applied on international and fixed income asset classes.
As we go through this exercise, this will bring to the fore a elephant in the ETF space - are there times when managed funds do outperform indexed funds - intuitively it would seem so and fixed income in this market seems to suggest itself as a prime example.
We will examine this deeper in an upcoming article
Disclosure:
MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
Symbols:DBC,PCRIX,EWX,NEWFX,ODVYX,VWO,JNK,PHIYX,PRRIX,TIP,AGG,PTTRX,GVI,LSBDX,PRWBX,SHY,BSV,VBISX,VEA,VWILX,EFV,TBGVX,REFDX,VNQ,FSLBX,XLF,IWV,OAKMX,SLASX,VIG,VINIX,VTI,CISIX,HACAX,MGK,VUG,RWMFX,VTV,BRWIX,IWP,POAGX,VOT,VASVX,VOE,AOM,VGSTX,OTCFX,VB,PSVIX,VBR,
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