11/12/2010

Building a steady and safe income producing portfolio is paramount to retirees. High yield stocks, preferred stocks, convertibles and bonds are the basic building blocks for such portfolios. Research results indicate that blue chip stocks with high dividends, unlike highly volatile and low dividend or no dividend stocks (such as many high tech stocks and small company stocks), have produced comparable or even slightly higher returns with less risk in long term. 

In this article, we present a high income investment plan (Retirement Income ETFs) that is based on asset allocation strategies. Both MyPlanIQ Strategic Asset Allocation (SAA) and Tactical Asset Allocation (TAA) strategies are used to construct model portfolios. 

This plan is designed for income producing purpose: high dividend (yield) stock ETFs are chosen for both US stocks and international stocks asset classes. We have decided to use general emerging market stocks ETFs (EEM or VWO) instead of some thinly traded high dividend emerging market stock ETFs. This situation will be changed once the high yield emerging market stock ETFs become more liquid and tradable. 

The plan uses 34 ETFs that represent the following five key asset classes:

U.S. stocks: VIG, DVY, SDY, FVD, VYM, PEY, PFF

International stocks: PID, IDV

Emerging market stocks: EEM, VWO

Real Estate Investment Trusts (REITs): IYR, ICF, VNQ, RWX

Fixed Income: 

• US Fixed Income:  HYG, LQD, VCLT, CIU, CORP, CSJ, VCSH, IEI, IEF, SHY, TLT, TIP, MBB, MUB, SHM
• International Fixed Income: BWX, EMB, PCY, WIP

Notice that preferred stocks PFF is classified under U.S. stocks. 

We compared the back tested performances of the SAA and TAA moderate model portfolios with the corresponding SIB (Simpler Is Better) five core asset ETF portfolios. As of 11/9/2010, the performance is: 

Performance table (as of Nov 10, 2010)

From the above chart, one can see that since the portfolio inception (12/31/2000),the Retirement Income ETFs Strategic Asset Allocation Moderate has outperformed its corresponding Five Core Asset Index ETF Funds Strategic Asset Allocation Moderate while in the meantime, the Retirement Income ETFs Tactical Asset Allocation Moderate has outperformed its corresponding Five Core Asset Index ETF Funds Tactical Asset Allocation Moderate. In fact, in the past ten years, the Retirement Income portfolios had lower standard deviation than the Five Core SIB. Please visit the corresponding portfolios for more detailed performance information. 

Currently, the SAA Moderate Portfolio has the following holdings and yields:

Compared with current sub-zero interests in a cash account, the above portfolio's yield is very attractive. 

In conclusions, using effective asset allocation strategies (especially the tactical asset allocation strategy), one can build an income producing portfolio that is less risky and achieve higher returns. Retirees or anyone who needs supplemental income can benefit from learning more on these investment plans.

labels:investment,

Symbols:VIG,DVY,SDY,FVD,VYM,PEY,PFF,SPY,IWM,PID,IDV,EFA,VEU,EEM,VWO,IYR,ICF,VNQ,RWX,HYG,LQD,VCLT,CIU,CORP,CSJ,VCSH,IEI,IEF,SHY,TLT,TIP,MBB,MUB,SHM,AGG,BND,BWX,EMB,PCY,WIP,

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11/12/2010

US sectors provide insight into the parts of the US economy that are flourishing or floundering. We are tracking the ETFs that represent ten different financial sectors.

More details are available on the MyPlanIQ website.

click to enlarge

We are entering the holiday period with the QE2 wind at our backs. This is going to increase consumer confidence and consumer spending.

The materials and commodity sectors have jumped due to a weak dollar, which the QE2 program exacerbates. It is also likely to stimulate demand for materials further pushing up the price.

The telecom sector includes wireless phone providers and they will likely do well through the holiday period with the increasing success of smart phones.

With the Republican victory in the House, some analysts are talking a lot these days about utilities stocks -- the reason being that the sector may benefit from the higher likelihood that the 15% tax rate on dividends will be extended.

The financial sector is still recovering from its meltdown and will continue to be under pressure with continuing concerns with mortgage stability and general fragility.

Healthcare's overall performance has been under pressure in this economic environment. Despite a substantial portion of their products being required for survival, sales remain sluggish. As a result, a wave of consolidation has gobbled up mid-cap companies with new products.

Some of these sectors will peak in the holiday season while others will settle over a longer time period as the political and economic climate evolves.

labels:investment,

Symbols:AGG,BND,CIU,CSJ,DBA,DBC,EEM,EFA,GSG,HYG,ICF,IEF,IWM,IYR,IYZ,JNK,LQD,MBB,MDY,MUB,PHB,QQQQ,SHV,SHY,SPY,TLT,USO,VEU,VNQ,VWO,XLB,XLE,XLF,XLI,XLK,XLP,XLU,XLV,XLY,

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11/12/2010

United Airlines (UAUA) Flight Attendant 401(k) Plan's 401K plan consists of 22 funds. These funds enable participants to gain exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income.

Summary
US Equity 7 funds (including company stock)
International Equity 2 funds
Balanced Funds 4 funds
Fixed income 3 fund
Target date 6 funds

If the company's stock is excluded (better left for an employee stock purchase plan) as well as the target date funds (which can't be effectively leveraged in a portfolio), the participant is left with 15 funds in three asset classes.

We compare this with the Kellogg (K) plan, which has three asset classes -- so that we can see what contributes to higher performance portfolio. In this case, Kellogg only has seven funds with a very limited choice in fixed income and international asset classes.

The list of minor asset classes covered:

Conservative Allocation: AOK 
Financial: IYF, VFH, IPF, PFI, DRF, RYF 
Foreign Large Blend: EFA, VEU, GWL, PFA 
Intermediate Government: IEI, VGIT, ITE 
Intermediate-term Bond: AGG, CIU, BIV, BND 
Large Blend: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX 
Large Growth: IVW, IWZ, JKE, VUG, ELG, QQQQ, RPG, SCHG 
Large Value: IVE, IWW, JKF, VTV, ELV, PWV, RPV, SCHV 
Moderate Allocation: AOM 
Retirement Income: 
Short Government: SHY, SHV, VGSH, PLK, USY 
Target Date 2000-2010: TZD 
Target Date 2011-2015: TZE 
Target Date 2021-2025: TZI 
Target Date 2031-2035: TZO 
Target Date 2041-2045: 
Us Equity: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX

As of Nov 8, 2010, this plan investment choice is rated as averagebased on MyPlanIQ Plan Rating methodology that was designed to measure how effective a plan's available investment funds are. We compare the detailed ratings with the Kellogg plan.

The key difference between the two plans is that the United plan has more lower quality funds, whereas the Kellogg plan has fewer higher quality plans. In the end, the Kellogg plan wins the ratings battle, but we should wait to see what that means in returns.

The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies (SAA and TAA, both provided by MyPlanIQ). For comparison purposes, we also include the moderate model portfolios of a typical 3 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
Fixed Income: AGG or BND

Performance chart (as of Nov 8, 2010)

click to enlarge

Performance table (as of Nov 8, 2010)

Currently, asset classes in US Equity (SPY, VTI), Foreign Equity (EFA, VEU) and Fixed Income (AGG, BND) are doing relatively well. These asset classes are available to United Airlines Flight Attendant 401(k) Plan participants.

The United plan outperforms the 3 Asset SIB (as did the Kellogg plan), let's now see how the two plans compare directly.

Performance chart (as of Nov 8, 2010)

Performance table (as of Nov 8, 2010)

The Kellogg portfolios outperform the United portfolios based on superior fund quality.

To summarize, United Airlines Flight Attendant 401(k) Plan plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles.

Improving the number of asset classes and quality of funds would enable portfolios to deliver better returns.

labels:investment,

Symbols:AGG,AOK,AOM,BIV,BND,CIU,DLN,DRF,EFA,ELG,ELV,GWL,IEI,IPF,ITE,IVE,IVV,IVW,IWV,IWW,IWZ,IYF,IYY,JKE,JKF,K,PFA,PFI,PLK,PWV,QQQQ,RPG,RPV,RSP,RYF,SCHG,SCHV,SCHX,SHV,SHY,SPY,TZD,TZE,TZI,TZO,UAUA,USY,VEU,VFH,VGIT,VGSH,VTI,VTV,VUG,VV,

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11/10/2010

While the world is becoming more connected, local conditions prevail resulting in different economic returns. MyPlanIQ tracks detailed weekly country economic trend movement. We use ETFs that represent each geographic region and present the results here.

More details are available on the MyPlanIQ website.

The largest industrial nations are meeting in Seoul this week and one of the topics on the agenda is rebalancing global growth.

Country	Symbol	8-Nov Trend Score	Direction
India	INP	57%	Week 1
South Africa	EZA	47%	Week 1
Singapore	EWS	43%	Week 1
Hong Kong	EWH	42%	Week 1
Mexico	EWW	41%	Week 1
Malaysia	EWM	40%	Week 1
South Korea	EWY	37%	Week 1
Russia	RSX	34%	Week 1
Australia	EWA	29%	Week 1
Taiwan	EWT	28%	Week 1
Canada	EWC	28%	Week 1
Brazil	EWZ	21%	Week 1
Switzerland	EWL	21%	Week 1
Germany	EWG	20%	Week 1
United Kingdom	EWU	20%	Week 1
China	FXI	19%	Week 1
Belgium	EWK	13%	Week 1
The Netherlands	EWN	13%	Week 1
Japan	EWJ	12%	Week 1
France	EWQ	9%	Week 1
Austria	EWO	9%	Week 1
Italy	EWI	-7%	Week 1
Spain	EWP	-17%	Week 1

India continues its growth as the recent visit of President Obama signals. There is increasing pressure for India to open its markets to the US to make the relationship a two way street.

South African Finance Minister Pravin Gordhan said the U.S. decision to purchase bonds to pump money into the economy may push up the rand and cost jobs. Group of 20 nations meeting in South Korea this week need to agree on ways to stimulate their economies without damaging those of others. 

SINGAPORE Airlines has reported a second-quarter profit of $380 million, reversing a $159 million loss during the same July-September period last year. The results were delivered on the back of a 18 per cent jump in revenue to $3.63 billion, as load factors and yields continued to improve, the airline said on Tuesday.

 

 Hong Kong launched a campaign Monday to promote itself as a global financial hub and rejected suggestions that it was trying to counter growing competition from Shanghai.

President Felipe Calderón, declared his support for small and medium businesses, which produce 7 out of the 10 jobs in Mexico

Japanese Prime Minister Naoto Kan on Tuesday pledged to bring Japan into the Trans-Pacific Strategic Economic Partnership Agreement, or TPP, saying the trade liberalization initiative will help the country return to a path of robust growth.

The Bank of France forecasts 0.5-percent fourth-quarter growth The French economy is struggling to put its strained public finances in order. There have been many protests about the move to increase the retirement age.

Recently the Austrian government greed to a rigid austerity budget which involves massive social cuts. At the same time, the government plans to raise taxes primarily for lower and middle income brackets.

Italy is the Eurozone's third largest economy, accounting for about 17% of GDP and has come through in reasonable shape. The banks are strong and Italians are Europe's best savers. Recently the the European Commission raised its growth forecast for Italy, projecting that faster export growth will see GDP expand  by 1.1% this year up from 0.8% forecast in May.

Spain's troubled banking sector is back in the news again. Despite the apparently succesful stress tests carried out over the summer problems persist, and don't seem likely to go away soon. Foremost among these is the steady rise in problem loans which have now risen to an all-time high, potentially endangering the credit rating of the country's financial institutions, according to a recent report from the credit ratings agency Moody's.

In conclusion, the G20 meeting is the big ticket item this week and what results could impact the direction of the indicators.

labels:investment,

Symbols: INP,EZA,EWS,EWH,EWW,EWM,EWY,RSX,EWA,EWT,EWC,EWZ,EWL,EWG,EWU,FXI,EWK,EWN,EWJ,EWQ,EWO,EWI,EWP,SPY,QQQQ,IWM,MDY,EFA,VEU,EEM,VWO,IYR,ICF,VNQ,GSG,DBC,DBA,USO,LQD,CSJ,CIU,HYG,JNK,PHB,TLT,IEF,SHY,SHV,BND,AGG,MUB,MBB,

 

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11/03/2010

Plan rating is a quick and easy way to get a read on a plan and what a portfolio built from the funds in the plan can deliver. This is not the whole story but is a rapid means of making an assessment.

In this article we are comparing two sets of plans to expose what plan rating gives you and contrast it with backtested results.

1. News Corp Versus New York Times have been separately reviewed and the purpose here is to compare their plan profile and compare the plan ranking.

As of Oct 26, 2010 News Corp's plan and ratings summary is:

Performance table (as of Oct 29, 2010)

Currently, asset classes in US Equity ( SPY , VTI ) , Foreign Equity ( EFA , VEU ) and Fixed Income ( AGG , BND ) are doing relatively well. These asset

2.  TD Ameritrade Versus Vanguard ETFs  have been separately reviewed and the purpose here is to compare their plan profile and compare the plan ranking.

Performance chart (as of Oct 25, 2010):

If we now compare ratings and five year performance we get the following graph:


If we now normalize both sides 



We can see that there is reasonable correlation between the plan rating and the five year return number.

Note that this is not an exact science and there are many exceptions. In addition, this is not the whole story, just a means of assessing a plan and uncovering where there may be weaknesses in the long term.

MyPlanIQ continues to improve the plan rating which is accessible to anybody at no cost.

labels:investment,

Symbols:SPY,VTI,EFA,VEU,EEM,VWO,AGG,BND,AOM,CIU,BIV,GWL,PFA,EFV,PID,DWM,TZD,TZE,TZG,TZI,TZO,TZL,TZV,IVV,IYY,IWV,VV,DLN,RSP,SCHX,IVW,IWZ,JKE,VUG,ELG,QQQQ,RPG,SCHG,IJR,IWM,JKJ,VB,DSC,PJM,DES,SAA,UWM,SCHA,GMM,PXH,DEM,SCHE,

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11/02/2010

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12/03/2010

This report reviews Aflac Incorporated 401(k) Savings and Profit Sharing Plan 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 participants in Aflac Incorporated 401(k) Savings and Profit Sharing Plan can achieve reasonable investment results using asset allocation strategies.

Plan Review and Rating

AFLAC Inc (Ticker:AFL) has the "Aflac Incorporated 401(k) Savings and Profit Sharing Plan".

Aflac Incorporated 401(k) Savings and Profit Sharing Plan's 401K plan consists of 11 funds. These funds enable participants to gain exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income. The list of minor asset classes covered:

Foreign Large Blend: EFA, VEU, GWL, PFA
Intermediate-term Bond: AGG, CIU, BIV, BND
Large Blend: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX
Large Growth: IVW, IWZ, JKE, VUG, ELG, QQQQ, RPG, SCHG
Large Value: IVE, IWW, JKF, VTV, ELV, PWV, RPV, SCHV
Mid-cap Growth: IJK, IWP, VOT, EMG, PWJ, RFG, UKW
Moderate Allocation: AOM
Small Growth: IJT, IWO, JKK, VBK, DSG, PWT, RZG, UKK

As of Dec 2, 2010, this plan investment choice is rated as 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 (35%)
Fund Quality -- Rated as (33%)
Portfolio Building -- Rated as (36%)
Overall Rating: (35%)

Current Economic and Market Conditions

We have experienced an uncertain 2010: plenty of worries on whether the US economy will climb out of the great recession and recover.

• The Federal Reserve embarked on Quantitative Easing II (QE2) to stimulate the economy.
• The housing market is still at its low but largely stabilized.
• The unemployment rate is stuck at 9%.

Americans continue to face an uncertain future, given (among others) the high unemployment rate, large federal and local government debts and global trade imbalance. With such an economic backdrop, the stock and debt markets are going to be volatile. Despite this, markets have been resilient and appear positioned to rebound.

In this market it is even more critical to properly diversify and respond market changes. MyPlanIQ offers two asset allocation strategies: strategic and tactical asset allocation strategies ( SAA and TAA for participants in Aflac Incorporated 401(k) Savings and Profit Sharing Plan).

Strategic Asset Allocation is based on well known modern portfolio theory and its key features include: diversification, proper fund selection and periodically re-balancing.

Tactical Asset Allocation works on a diversified array of assets provided by funds in a plan and adjusts asset mixes based on market conditions such as asset price momentum utilized by TAA.

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 3 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)
Fixed Income: (AGG or BND)

Performance chart (as of Dec 2, 2010)

Performance table (as of Dec 2, 2010)

Currently, asset classes in US Equity (SPY,VTI), Foreign Equity (EFA,VEU) and Fixed Income (AGG,BND) are doing relatively well. These asset classes are available to Aflac Incorporated 401(k) Savings and Profit Sharing Plan participants.

To summarize, Aflac Incorporated 401(k) Savings and Profit Sharing Plan plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles.

Symbols: AFL , SPY , VTI , EFA , VEU , AGG , BND , AOM , CIU , BIV , GWL , PFA , IVE , IWW , JKF , VTV , ELV , PWV , RPV , SCHV , IVV , IYY , IWV , VV , DLN , RSP , SCHX , IVW , IWZ , JKE , VUG , ELG , QQQQ , RPG , SCHG , IJK , IWP , VOT , EMG , PWJ , RFG , UKW , IJT , IWO , JKK , VBK , DSG , PWT , RZG , UKK

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