Schwab Select ETF Plan Has Bright Prospects
04/06/2011 1 comments
Schwab ETF Plan Has Good Pedigree and Bright Prospects Retirement is now a "hair on fire" problem. There is much talk of working longer, downsizing, living on less. However, there is something you can do to help improve your risk adjusted returns. Look at your portfolios and plans to build a diversified portfolio with a systematic investment strategy.
This is not as hard as you might think -- to highlight this point, we feature a plan created by a non professional that matches up well with any of the other plans. Kevin Carr. is an individual investor who employs a long term strategy. He manages an individual common stock portfolio as well as many plans on MyPlan IQ. If you have any questions regarding this plan please contact him.
This plan provides you with Schwab's experts’ top picks of low-cost ETFs representing approximately 50 ETFs, based on rigorous criteria including expenses, tracking error, trading volume, and more. Schwab ETFs trade commission free. There are no redemption periods so you can start today and not worry about holding periods.
We report on this Schwab ETF Select List which consists of 49 funds. These funds give exposure to 6 major assets: US Equity, Commodity, Foreign Equity, REITs, Emerging Market Equity, Fixed Income.
Asset Class | Ticker | Name |
---|---|---|
LARGE BLEND | SCHX | Schwab U.S. Large-Cap ETF |
LARGE GROWTH | SCHG | Schwab U.S. Large-Cap Growth ETF |
LARGE VALUE | SCHV | Schwab U.S. Large-Cap Value ETF |
MID-CAP BLEND | VO | Vanguard Mid-Cap ETF |
Mid-Cap Growth | VOT | Vanguard Mid-Cap Growth ETF |
MID-CAP VALUE | VOE | Vanguard Mid-Cap Value ETF |
SMALL BLEND | SCHA | Schwab U.S. Small-Cap ETF |
Small Growth | VBK | Vanguard Small Cap Growth ETF |
SMALL VALUE | VBR | Vanguard Small Cap Value ETF |
LARGE BLEND | SCHB | Schwab U.S. Broad Market ETF |
LARGE VALUE | VYM | Vanguard High Dividend Yield Indx ETF |
Foreign Large Blend | SCHF | Schwab International Equity ETF |
Foreign Large Growth | EFG | iShares MSCI EAFE Growth Index |
Foreign Large Value | EFV | iShares MSCI EAFE Value Index |
FOREIGN SMALL/MID GROWTH | SCHC | Schwab International Small-Cap Eq ETF |
DIVERSIFIED EMERGING MKTS | SCHE | Schwab Emerging Markets Equity ETF |
Foreign Large Blend | VEU | Vanguard FTSE All-World ex-US ETF |
WORLD STOCK | VT | Vanguard Total World Stock Index ETF |
EUROPE STOCK | VGK | Vanguard European ETF |
DIVERSIFIED PACIFIC/ASIA | VPL | Vanguard Pacific Stock ETF |
JAPAN STOCK | EWJ | iShares MSCI Japan Index |
China Region | GXC | SPDR S&P China |
Intermediate-Term Bond | BND | Vanguard Total Bond Market ETF |
SHORT GOVERNMENT | SCHO | Schwab Short-Term U.S. Treasury ETF |
Intermediate Government | SCHR | Schwab Intermediate-Term U.S. Trsy ETF |
LONG GOVERNMENT | TLH | iShares Barclays 10-20 Year Treasury Bd |
Inflation-Protected Bond | SCHP | Schwab U.S. TIPS ETF |
Intermediate-Term Bond | CIU | iShares Barclays Intermediate Credit Bd |
High Yield Bond | JNK | SPDR Barclays Capital High Yield Bond |
WORLD BOND | BWX | SPDR Barclays Capital Intl Treasury Bond |
Muni National Long | MUB | iShares S&P National AMT-Free Muni Bd |
Consumer Discretionary | XLY | Consumer Discret Select Sector SPDR |
Consumer Staples | XLP | Consumer Staples Select Sector SPDR |
Equity Energy | XLE | Energy Select Sector SPDR |
Financial | XLF | Financial Select Sector SPDR |
Health | XLV | Health Care Select Sector SPDR |
Industrials | XLI | Industrial Select Sector SPDR |
Natural Resources | XLB | Materials Select Sector SPDR |
Technology | XLK | Technology Select Sector SPDR |
Communications | IYZ | iShares Dow Jones US Telecom |
Utilities | XLU | Utilities Select Sector SPDR |
COMMODITIES BROAD BASKET | DBC | PowerShares DB Commodity Index Tracking |
Commodities Agriculture | DBA | PowerShares DB Agriculture |
Commodities Precious Metals | IAU | iShares Gold Trust |
Commodities Industrial Metals | DBB | PowerShares DB Base Metals |
Commodities Energy | USL | United States 12 Month Oil |
MISCELLANEOUS SECTOR | PFF | iShares S&P U.S. Preferred Stock Index |
REAL ESTATE | VNQ | Vanguard REIT Index ETF |
Asset Class | Number of funds |
---|---|
Balanced Fund | 0 |
REITs | 1 |
Fixed Income | 9 |
Commodity | 5 |
Sector Fund | 11 |
Foreign Equity | 8 |
Emerging Market Equity | 3 |
US Equity | 11 |
Other | 1 |
Total | 49 |
Many are looking for access to a well rounded ETF plan through Schwab. This fills this hole and as Schwab makes more of their own funds available, it will be possible to move them into the plan. On this review, the only comment would be to add another REIT choice. The other asset classes have a good number of selections without being overwhelming.
As of Apr 4, 2011, this plan investment choice is rated as above average based on MyPlanIQ Plan Rating methodology that was designed to measure how effective a plan's available investment funds are . It has the following detailed ratings:
Diversification -- Rated as great (99%)
Fund Quality -- Rated as average (47%)
Portfolio Building -- Rated as average (56%)
Overall Rating: above average (66%)
Thehigh diversification score means that all the major and minor asset classes have been ticked. Fund quality is lower because some of the ETF's don't have a long history but that shouldn't impede the ability for the future.
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
Commodity: DBC
Foreign Equity: EFA or VEU
REITs: IYR or VNQ or ICF
Emerging Market Equity: EEM or VWO
Fixed Income: AGG or BND
Performance chart (as of Apr 4, 2011)
Performance table (as of Apr 4, 2011)
Portfolio Name | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
---|---|---|---|---|---|---|
Schwab ETF Select List Tactical Asset Allocation Moderate | 9% | 82% | 8% | 72% | 12% | 89% |
Schwab ETF Select List Strategic Asset Allocation Moderate | 14% | 118% | 3% | 15% | 4% | 20% |
Six Core Asset ETF Benchmark Tactical Asset Allocation Moderate | 9% | 81% | 10% | 82% | 13% | 89% |
Six Core Asset ETF Benchmark Strategic Asset Allocation Moderate | 14% | 121% | 4% | 20% | 7% | 34% |
This portfolio performs well against the six asset ETF benchmark
- SAA provides lower volatility while albeit delivering lower historical returns but as more of the newer funds are applied to the portfolio, there will be more opportunity for closing the gap
- The TAA portfolios run neck and neck over the five year period
In a future article, we will review performance over the last three months to see how the plan has performed in the light of recent events.
Kay Takeaways
- Building a plan of funds is not the preserve of the few -- anybody who has the interest and application to research can provide well constructed plans
- It is possible to benefit from those individuals while still having transparency and not being captive to any particular broker
Symbols: SPY, VTI, EFA, VEU, EEM, VWO, IYR, VNQ, ICF, AGG, BND, DBC, HYG, JNK, PHB, CIU, BIV, MUB, TFI, PZA, MLN, GII, PUI, DBU, RYU, UPW, IYH, IXJ, VHT, XBI, PBE, DBR, RYH, EFG, IXP, PTE, DGG, LTL, IYM, IGE, VAW, XLB, XME, PYZ, DBN, RTM, UYM, MTK, PTF, DBT, RYT, ROM, GWL, PFA, IVE, IWW, JKF, VTV, ELV, PWV, RPV, SCHV, EFV, PID, DWM, IYF, VFH, IPF, PFI, DRF, RYF, KXI, VDC, PSL, DPN, RHS, RXI, VCR, IYJ, EXI, VIS, IGOV, BWX, WIP, IVV, IYY, IWV, VV, DLN, RSP, SCHX, IOO, VT, SHY, SHV, VGSH, PLK, USY, TLT, TLH, IEF, EDV, VGLT, TLO, PLW, IEV, VGK, PEF, DEB, IVW, IWZ, JKE, VUG, ELG, QQQQ, RPG, SCHG, IJJ, IWS, JKI, VOE, EMV, PWP, RFV, UVU, IJH, IWR, JKG, VO, MDY, EMM, PJG, DON, EZM, MVV, IFSM, VSS, SCHC, IJS, IWN, JKL, VBR, DSV, PWY, RZV, UVT, IJR, IWM, JKJ, VB, DSC, PJM, DES, SAA, UWM, SCHA, GMM, PXH, DEM, SCHE, ITE, IXC, IPW, DBE, RYE, DKA, IEI, VGIT, IJK, IWP, VOT, EMG, PWJ, RFG, UKW, IJT, IWO, JKK, VBK, DSG, PWT, RZG, UKK, TIP, EPP, VPL, GMF, PAF, EWJ, JPP, PJO, DXJ, GSG
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.
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