High Quality Funds in Oracle 401K Plan Boost Portfolio Returns
06/13/2011 0 comments
Retirement investing is a long term process. This report reviews Oracle Corporation 401(k) Savings and Investment 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 Oracle Corporation 401(k) Savings and Investment Plan can achieve reasonable investment results using asset allocation strategies.
Plan Review and Rating
Oracle Corporation 401(k) Savings and Investment Plan consists of 30 funds. These funds enable participants to gain exposure to 4 major assets: US Equity, Foreign Equity, Emerging Market Equity, Fixed Income.
The plan has many high quality funds including Dodge & Cox stock (DODGX), Fidelity Contra (FCNTX), Lazard Emerign Markets (LZEMX), Fidelity Low Priced Stocks (FLPKX). Additionaly, Pimco's total return bond fund (PTTRX), managed by Bill Gross gives participants a solid choice in fixed income.
As of Jun 10, 2011, this plan investment choice is rated as above 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 average (52%)
Fund Quality -- Rated as above average (75%)
Portfolio Building -- Rated as great (92%)
Overall Rating: above average (75%)
Current Economic and Market Conditions
Last week marked the sixth week of losses in the U.S. stock market. Investors are now clearly in a risk off mode. Key observations include
- U.S. stock market index (Vanguard Total Stock Market Index (VTI)), for example, is now ranked below U.S. 7-10 long term treasury bonds (IEF) and just a notch above credit bond index (CFT) in our major trend table.
- For the time being, commodities (DBC) and Gold (GLD) are still holding first places, with international REITs (RWX) is still strong.
- On the fixed income side, long bonds (TLT) (LQD) are now trending higher while emerging market bonds (PCY) is still holding a higher place.
This shows investors' strong risk aversion but it is still not water shed flight to safety moment yet.
For more information on how these assets are ranked, please see here.
The following lists how major assets are ranked.
Major Asset Classes Trend
06/10/2011
| Description | Symbol | 1 Week | 4 Weeks | 13 Weeks | 26 Weeks | 52 Weeks | Trend Score |
|---|---|---|---|---|---|---|---|
| US Stocks | VTI |
-2.43% | -5.02% | -1.96% | 4.63% | 21.2% | 3.28% |
| International Developed Stks | EFA |
-2.95% | -2.44% | -0.35% | 3.57% | 22.03% | 3.97% |
| Emerging Market Stks | VWO |
-2.69% | -0.43% | 1.82% | 3.41% | 26.05% | 5.63% |
| Frontier Market Stks | FRN |
0.66% | 1.19% | 3.58% | -5.35% | 20.94% | 4.21% |
| US Equity REITs | VNQ |
-4.25% | -4.01% | 1.18% | 9.64% | 20.52% | 4.61% |
| International REITs | RWX |
-2.82% | -0.55% | 2.46% | 6.52% | 34.29% | 7.98% |
| Commodities | DBC |
0.1% | 4.27% | 2.68% | 15.4% | 37.95% | 12.08% |
| Gold | GLD |
-0.65% | 2.48% | 7.97% | 10.21% | 24.36% | 8.87% |
| Total US Bonds | BND |
0.15% | 1.01% | 2.67% | 4.0% | 5.68% | 2.7% |
| International Treasury Bonds | BWX |
-1.2% | 1.93% | 4.36% | 10.12% | 19.92% | 7.03% |
| Emerging Mkt Bonds | PCY |
0.18% | 0.85% | 4.25% | 3.64% | 12.83% | 4.35% |
| US Credit Bonds | CFT |
0.02% | 0.37% | 2.41% | 4.69% | 8.06% | 3.11% |
| US High Yield Bonds | JNK |
-1.32% | -2.13% | -0.03% | 6.5% | 19.11% | 4.43% |
| Mortgage Back Bonds | MBB |
-0.03% | 0.78% | 2.33% | 3.48% | 4.18% | 2.15% |
| Municipal Bonds | MUB |
-0.51% | 0.28% | 4.31% | 6.03% | 2.98% | 2.62% |
| Intermediate Treasuries | IEF |
0.26% | 2.14% | 4.8% | 5.55% | 7.24% | 4.0% |
| Treasury Bills | SHV |
-0.02% | -0.04% | 0.02% | 0.07% | 0.1% | 0.03% |
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 4 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
Emerging Market Equity: EEM or VWO
Fixed Income: AGG or BND
Performance chart (as of Jun 10, 2011)
Performance table (as of Jun 10, 2011)
| Portfolio Name | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
|---|---|---|---|---|---|---|
| Oracle Corporation 401(k) Savings and Investment Plan Tactical Asset Allocation Moderate |
10% | 121% | 10% | 109% | 13% | 121% |
| Oracle Corporation 401(k) Savings and Investment Plan Strategic Asset Allocation Moderate |
16% | 202% | 7% | 47% | 8% | 60% |
| Four Core Asset ETF (EM) Benchmark Tactical Asset Allocation Moderate |
4% | 44% | 6% | 53% | 10% | 69% |
| Four Core Asset ETF (EM) Benchmark Strategic Asset Allocation Moderate |
18% | 151% | 3% | 12% | 6% | 26% |
From the above table, one can see that Oracle's plan does deliver extra returns over the simple four core asset ETF portfolios. It shows high quality funds can indeed add value.
To summarize, investors adopting Oracle Corporation 401(k) Savings and Investment Plan plan can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles.
Symbols: ORCL, VTI, VEU, VWO, BND, FLPKX, DODGX, FCNKX, LZEMX, PTTRX
Exchange Tickers: (ORCL), (VTI), (VEU), (VWO), (BND), (VTIVX), (VFORX), (VTTHX), (VTHRX), (VTTVX), (VTWNX), (VTXVX), (VTENX), (VTOVX), (VTINX), (VFIFX), (FSIIX), (VIEIX), (VIIIX), (VBMPX), (FLPKX), (DODGX), (FGCKX), (FCNKX), (FWWFX), (DODFX), (ARTKX), (ARTVX), (LZEMX), (JMVAX), (TCMMX), (FBAKX), (PTTRX)
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