 |
Vanguard ETF: |  |
7.4%* |
|
Diversified Core: | |
8.1%* |
|
Six Core Asset ETFs: | |
7.3%* |
Articles on DBC
- Core Satellite – A Way to Step Into Tactical Asset Allocation
10/19/2010
Buy and hold asset allocation has become an almost unquestioned doctrine of long term investing. The emergence of modern portfolio theory in conjunction with a long bull market seemed to prove it largely infallible.
However, recent market events have put the approach under pressure and many are considering buy and hold insufficient without some additional hedges based on what we have seen and learned.
The comparison of returns from strategic and tactical asset allocation over the last five years clearly shows the dilemma. There is a significant benefit to having a tactical component to any portfolio.
Some may still be suspicious of momentum based investing and while buy and hold has clearly had problems over the past five years there is still reluctance to move. A core satellite strategy where some of the portfolio is tactically managed and the balance is buy and hold may be a good compromise for those wanted to dip their toe into momentum based portfolios.
We have used SIB portfolios to demonstrate the benefit of asset allocation. SIB’s are made up of the market index funds so that there is no special sauce in the fund selection. We are going to extend the use of SIBs to create core satellite portfolios and compare their performance properties against a pure strategic and pure tactical asset allocation of the same fund base.
The portfolios will have six asset classes as they have an optimal level of performance traded off against the effort to maintain a large number of asset classes.
Index Funds Asset ClassTickerNameLarge BlendVTSMXVanguard Total Stock Mkt IdxForeign Large BlendVGTSXVanguard Total Intl Stock IndexDiversified Emerging MarketsVEIEXVanguard Emerging Mkts Stock IdxReal EstateVGSIXVanguard REIT IndexCommodities Broad BasketDBCPowerShares DB Commodity Idx Trking FundIntermediate-Term BondVBMFXVanguard Total Bond Market IndexETF Asset ClassesTickerLARGE BLENDVTI, SPYForeign Large BlendVEU, EFADiversified Emerging MarketsVWO, EEMReal EstateVNQ, IYRCommodities Broad BasketDBCIntermediate-Term BondBND, AGG
We are going to compare five portfolios:- Tactical Asset Allocation only with 40% in fixed income
- Strategic Asset Allocation only with 40% in fixed income
- 50/50 Strategic/Tactical 40%
- 60/40 Strategic/Tactical 40%
- 70/30 Strategic/Tactical 40%
Building and maintaining a core-satellite portfolio can be labor intensive and error prone or expensive to outsource. The MyPlanIQ system enables an individual to rapidly build and maintain a model core-satellite portfolio and be able create historical results. This is how the comparison was achieved in this case.
The screenshot shows how to assign a percentage of the portfolio to strategic and tactical asset allocation and then examine the performance of the portfolio. In this case, it is 70% strategic and 30% tactical asset allocation
Intuitively we would expect to see tactical asset allocation giving us the highest returns with, perhaps a little more volatility and the hybrid portfolios giving a range of returns and volatility.
Portfolio Performance ComparisonPortfolio Name1Yr AR3Yr AR5Yr AR10%9%14%11%6%11%11%5%10%12%4%10%13%2%7%
The results are much as expected with tactical asset allocation and strategic asset allocation bounding performance ranges and the core satellites filling in the middle.
The draw down ratios also behave as expected.
Portfolio/DD1 Yr3 Yr5 YrInceptionTAA10%12%14%14%50-50%9%24%24%24%60-409%27%27%27%70-308%29%29%29%SAA8%39%39%39%
The concept of a core-satellite portfolio may appeal to many. The problem of constructing an measuring such a portfolio has been greatly simplified with analytical tools such as the MyPlanIQ system.
Takeaways- In the current market conditions, tactical asset allocation still provides the best performance and has the lowest risk
- Those who want to move cautiously into momentum based portfolios can use core-satellite to dip their toe into the water
- ETF’s are an ideal, low cost vehicle to construct a core satellite portfolio
labels:investment,
Symbols:DBC,VBMFX,VTI,SPY,VEU,EFA,VWO,EEM,VNQ,IYR,BND,AGG,Portfolio-Building,with,ETFs,Closed-End,Funds,Commodity,ETFs,Developed,Market,ETFs,core-satellite,
- Lazy Portfolios -- The Playoffs II
10/19/2010
This is the second article as we attempt to whittle down the lazy portfolios to four finalists for great analysis of what makes for a great portfolio. We are in the bottom half of the alphabetical list and the eight are listed in reducing order asset classes and funds. We have stated that the winners should be those with the most asset classes and highest number of funds.
Portfolio Classes Funds ETF Equivalent Seven-12 7 12 Y SIX SIB SAA 6 6 y Gone Fishin' 5 10 y Swensen 6 4 6 Y Wasik`s Nano 4 5 Y Harry Browne 3 4 Y Schultheis 3 3 Y Lowell 2 8 Y We are using this series of comparisons to validate whether this proves to be true.- Craig L. Israelsen, Ph.D., is an Associate Professor at Brigham Young University. The Seven Equally Weighted, twelve fund portfolio is aimed to protect against losses.
- The MyPlanIQ six asset SIB has index funds for each of the asset classes represented and rebalances monthly – this is primarily a benchmark portfolio
- Alexander Green proposed this The Gone Fishin' Portfolio which was outlined in his book 'The Gone Fishin' Portfolio'
- David Swensen, the Yale Endowment Manager, proposed this one size fit in all model portfolio for individual investors.
- John Wasik has been a professional journalist and author for 30 years specializing in personal finance. John proposed a portfolio which employs a handful of index or ETFs
- Harry Browne is the author of Fail-Safe Investing
- Bill Schulthe is is a former Smith Barney broker and author of "The Coffeehouse Investor."
- Jim Lowell edits MarketWatch's ETF Trader, an investment letter employing a momentum-based exchange-traded-fund strategy for long-term investors.
The returns are now presented in order of highest to lowest of the five year returns. How do the returns compare to what we would have expected?
Portfolio/AR(%) 1 Yr 3 Yr 5 Yr Inception Harry Browne 12.49 7.40 8.99 7.31 Six SIB SAA 12.54 1.61 7.44 8.26 Seven-12 15.55 0.80 6.41 6.16 Swensen Six 15.10 (0.24) 6.21 7.10 Gone Fishin' 12.98 (0.34) 5.64 6.72 Wasik`s Nano 15.34 (1.93) 4.74 4.66 Schultheis 9.23 (2.28) 4.68 4.59 Lowell 12.45 (6.26) 3.55 6.74 - The portfolios roughly follow the asset class/fund class as would be expected
- The Harry Browne portfolio stands out as the clear exception to the rule – it has a signnificant lead over the other portfolios
- The six asset SIB performed well – that was expected. Six asset classes with index funds should perform well
When we look at the drawdown for each of the portfolios, it will reveal which is the most painful to own.Portfolio/DD1 Yr3 Yr5 YrInceptionHarry Browne5%15%15%15%Swensen Six8%39%39%39%Six SIB SAA8%39%39%39%Schultheis9%39%39%39%Seven-128%40%40%40%Gone Fishin'9%42%42%42%Wasik`s Nano9%44%44%44%Lowell16%57%57%57%
Again the Harry Browne portfolio is the clear winner.
We select the top two – which are the Harry Browne and Six asset SIB to move to the final round where they will be put against the best two funds from the top half of the alphabet.
Takeaways- The portfolios followed the expected path against asset classes and funds
- The Harry Browne portfolio was the clear winner and was the exception – we will find out in the final article whether it proves the rule
- With the exception of the Harry Browne portfolio, the drawdown ratios are uncomfortably high
- ETF’s can be used to implement any of these strategies
labels:investment,
Symbols:ACWI,ACWX,ADRE,AGG,BIV,BLV,BND,BSV,BWX,CFT,CIU,CSJ,DBC,DBV,DIA,DVY,EDV,EEM,EFA,EFG,EFV,EMB,ETF,GLD,GOOG,GSG,GXC,HPQ,HYG,ICF,IEF,IEI,IFGL,IGOV,IGR,IJH,IJJ,IJK,IJR,IJS,IJT,IVE,IVV,IVW,IWB,IWC,IWD,IWF,IWM,IWN,Portfolio-Building,with,ETFs,Closed-End,Funds,Commodity,ETFs,Currency,ETFs,Developed,Market,ETFs,
- Lazy Portfolios -- The Playoffs
10/19/2010
We have compared the performance of fifteen buy and hold portfolios from investing luminaries. Each of the portfolios was measured for performance against SIBs and their relative merits examined. We now move into a playoff round where we will compare the portfolios with each other and see if we can find an eventual winner and look at why they won and what we can learn from this.
When we were testing the portfolios against SIBs, we introduced a tactical asset allocation strategy which usually turned out to have the best performance. For this series of peer comparisons, we are only going to use a buy and hold strategy. When we find the eventual winner, we will then perform a final comparison with tactical asset allocation and see what we conclude.
The portfolios have been sorted alphabetically and we are going to start with the top part of the alphabet. The portfolios will be listed by decreasing number of asset classes and decreasing number of funds. We would expect that the portfolio with the greatest number of asset classes to have the highest returns and we will test that to see to what extent it is true.
Table of Lazy Portfolios and their classes and fundsPortfolio Classes Funds ETF Equivalent Fund Advice 5 11 Y Gibson 5 6 y Five SIB SAA 5 5 Y Aronson 4 11 y Armstrong 4 7 y Four SIB SAA 4 4 Y Burns/Tobias 3 3 Y - Paul Merriman's FundAdvice.com website has indexed porfolios for several fund companies. The basic strategy is the same as with all the other Lazy Portfolios, here with 11 no-load index funds
- Gibson's 5 Equal Asset Allocation Strategy comes from Roger Gibson’s widely read "Asset Allocation: Balancing Financial Risks.”
- The MyPlanIQ five asset SIB has index funds for each of the asset classes represented and rebalances monthly – this is primarily a benchmark portfolio
- Ted Aronson and his AJO Partners manage about $25 billion of institutional assets. Aronson puts his family's taxable money in this well-diversified portfolio of no-load index funds
- Frank Armstrong, author of The Informed Investor, proposed his portfolio for an MSN Money article
- The MyPlanIQ four asset SIB has index funds for each of the asset classes represented and rebalances monthly – this is primarily a benchmark portfolio
- Scott Burns has covered personal finance and investments for nearly 40 years and ranks as one of the most widely read personal finance writers in the country/ Andrew Tobias, a Harvard alum and writer of 12 books including The Only Investment Guide You'll Ever Need.
Table of Lazy Portfolios and their Annual ReturnsPortfolio/AR(%) 1 Yr 3 Yr 5 Yr Inception Five SIB SAA 14.27 1.73 7.67 8.38 Four SIB SAA 10.76 0.17 7.11 7.40 Fund Advice 10.85 0.24 6.06 6.75 Armstrong 11.69 (1.76) 5.15 5.55 Burns/Tobias 0.45 (2.32) 4.54 4.48 Aronson 8.46 (1.10) 3.48 3.59 Gibson 8.63 (4.72) 0.08 3.43 The returns are now presented in order of highest to lowest of the five year returns. How do the returns compare to what we would have expected.- There was a wider spread than expected on the four and five asset class portfolios and the Burns/Tobias three asset class, three fund portfolio performed better than expected
- A five asset class portfolio came out on top – that was expected. The fact that an index based portfolio won out it also not surprising as index funds often outperform funds with active management
- The fact that a four asset portfolio beat a five asset portfolio demonstrates that picking the right funds in an asset class is important and that index funds deliver good results
- For a very simple three asset portfolio, the Burns/Tobias performance came higher in the league table
- The most surprising result is that the Gibson portfolio performed so poorly. When breaking down the long term results of this portfolio, the selection of asset classes has given the portfolio a modest return with a low drawdown index. In the significant market downturn over the past few years, it suffered (as did most buy and hold strategies) badly and has returned to its modest gains whereas other portfolios have had a higher drawdown ratio but a faster recovery
Table of Lazy Portfolios and their Draw Down RatiosPortfolio/DD 1 Yr 3 Yr 5 Yr Inception Aronson 6% 30% 30% 30% Fund Advice 9% 38% 38% 38% Gibson 7% 38% 38% 38% Four SIB SAA 9% 40% 40% 40% Five SIB SAA 8% 41% 41% 41% Scott Burns 9% 41% 41% 41% Armstrong 11% 44% 44% 44% We list the draw down ratios for each of the portfolios and it’s clear that with the recent turbulence, all of them are higher than would be desired.We will select the top two – which are the four and five asset SIBs to move to the final round where they will be put against the best two funds from the bottom half of the alphabet.
Takeaways- Asset classes and number of funds in each class are an indicator of better returns but it’s not the only thing
- Index funds continue to show good results against managed funds
- or those investing in the very long term, looking at the draw down index is important because it will help you live with the fund selection you have made
- ETF’s can be used to implement any of these strategies
labels:investment,
Symbols:ACWI,ACWX,ADRE,AGG,BIV,BLV,BND,BSV,BWX,CFT,CIU,CSJ,DBC,DBV,DIA,DVY,EDV,EEM,EFA,EFG,EFV,EMB,ETF,GLD,GOOG,GSG,GXC,HPQ,HYG,ICF,IEF,IEI,IFGL,IGOV,IGR,IJH,IJJ,IJK,IJR,IJS,IJT,IVE,IVV,IVW,IWB,IWC,IWD,IWF,IWM,IWN,Portfolio-Building,with,ETFs,Closed-End,Funds,Commodity,ETFs,Currency,ETFs,Developed,Market,ETFs,
- Dow Theory Revisited, Reviewed, Compared
10/08/2010
In this article we are going to revisit Dow Theory -- the grand-daddy of all portfolio strategies and then compare it with more modern approaches. We will look at Shiller, a long term but newer approach and then modern portfolio theory which is based on asset allocation.
The Dow Theory is one of the most venerable strategies. It uses the price trends of the Dow Jones Industrial index (^DJI) and the Dow Jones Transportation Index (^DJT) to decide whether to invest in the stock market.The Dow Theory has been around for almost 100 years, yet even in today’s volatile and technology-driven markets, the basic components of Dow theory still remain valid. Developed by Charles Dow, refined by William Hamilton and articulated by Robert Rhea, the Dow Theory addresses not only technical analysis and price action, but also market philosophy. Many of the ideas and comments put forth by Dow and Hamilton became axioms of Wall Street.
Today, there are a variety of strategies
There are multiple interpretations of the original Dow Theory. This strategy represents a typical version: all the buy and sell signals are confirmed by both the Dow Jones Industrial Average and Dow Jones Transportation Average.
The Dow Jones Transportation Average is used to triangulate the Dow Jones Industrial Average to ensure that an upward or downward trend is not just a localized phenomenon.
The buy signal- A primary low is established
- A secondary bounce
- A pullback of around 3% but above previous lows
- Both averages hold above the prior lows
- Both averages exceed the secondary bounce
The sell signal- A primary high is established
- A secondary drop
- A rally of over 3% but falls short of the previous high
- A drop of both averages below the previous drop
The funds in the portfolio are (ETF alternatives):- Wilshire 5000 total return index ^DWC (VTI, SPY, IWM)
- Cash (BND)
This is a long established strategy and should be reviewed to see how it performs in more recent operating conditions. To achieve this, we will compare results with another long term plan – Shiller, a modern portfolio (a 6 asset SIB with tactical asset allocation) and the total market (^DWC).
Click here for the interactive graphHistorical Returns for Dow Theory, Shiller and 6SIB TAA Annual Returns 1 Year 3 Years 5 Years Dow Theory -14% -12% -2% Shiller 8% 16% 11% 6 SIB TAA 9% 10% 13%
The Dow Theory has not been effective in the last ten years given the prevailing market conditions. It is possible that a different investment portfolio would perform better but given that Shiller is using similar funds, Shiller appears to be a better choice.
Today, Dow Theory is signallingTakeaways:- Both the Dow Theory and Shiller are based on long term indices and both of them outperform the market
- Shiller performs better as we recover from the nightmare of the last few years
- Modern portfolio theory based on diversification and tactical asset allocation consistently outperforms the other strategies – within the measurement timeframe
labels:investment,
Symbols:VTI,SPY,IWM,BND,AGG,DBC,EEM,EFA,GSG,IYR,LQD,SHY,TLT,Bonds,Dollar/Currencies,Earnings,Economy,Hedge,Funds,
- Bernstein's No Brainer and Smart Money Portfolios Reviewed
10/08/2010
Dr. William Bernstein is the author of the "Intelligent Asset Allocator" and "The Four Pillars of Investing." He's also a physician, neurologist and financial adviser to high-net-worth individuals.
He has proposed a number of lazy portfolios. There are two that will be examined today.The no-brainer portfolio comprises the following fund allocation- 25% in Vanguard 500 Index VFINX (IVW)
- 25% in Vanguard Small Cap NAESX or VTMSX (VB)
- 25% in Vanguard Total International VGTSX or VTMGX (EFA, VEA)
- 25% in Vanguard Total Bond VBMFX or VBISX (BND)
Things to note about the portfolio:- Heavily weighted towards domestic equities
- Similar to a three asset SIB with domestic, international and fixed income
- It would be better to have some REIT or emerging markets exposure
- We will compare the no brainer portfolio to a three and four asset SIB
Annual returns 1 year 3 years 5 years Bernstein No Brainer 10 -1 4 Bernstein Tactical Asset Allocation -3 0 6 Four SIB Strategic Asset Allocation 14 -1 5 Three SIB Strategic Asset Allocation 8 -4 4 Three SIB Tactical Asset Allocation -5 0 6 The Bernstein no-brainer tracks very closely with the four asset SIB. It’s interesting to note that the three asset Bernstein tracks closer to the four asset SIB than expected. So as a lazy portfolio, it performs satisfactorily. Year to date, however, the four asset SIB has better performance.
The tactical asset allocation strategies deliver better results with higher returns and lower volatility. The no brainer funds outperform the 3 asset SIB but underperform the 4 asset SIB which is to be expected.
The smart money portfolio comprises the following fund allocation- 40% Vanguard Short Term Investment Grade VFSTX (SCJ, SHY)
- 15% Vanguard Total Stock Market VTSMX (VTI)
- 10% Vanguard Small Cap Value VISVX (VBR)
- 10% Vanguard Value Index VIVAX (VTV)
- 5% Vanguard Emerging Markets Stock VEIEX (VWO)
- 5% Vanguard European Stock VEURX (VEU)
- 5% Vanguard Pacific Stock VPACX (VPL)
- 5% Vanguard REIT Index VGSIX (RWX, VNQ)
- 5% Vanguard Small Cap Value NAESX or VTMSX (VB)
To summarize:- 40% in US equities
- 10% in international equities
- 5% in emerging market equities
- 5% in REIT
- 40% in fixed income
Annual returns 1 year 3 years 5 years Smart Money 10 -1 4 Smart Money Tactical Asset Allocation -3 0 6 Five SIB Strategic Asset Allocation 14 -1 5 Five SIB Tactical Asset Allocation 8 -4 4 Four SIB Tactical Asset Allocation -5 0 6 Although the smart money portfolio has five asset classes, international, emerging markets and real estate are so under-weighted that they act as if they are a single class so, again, it’s more like a three asset class portfolio. The five asset SIB with strategic asset allocation has similar behavioral properties but clearly delivers better results based on superior diversification.
One the strategy is moved over to tactical asset allocation, there are enough asset classes in the Bernstein portfolio for the Larger Chartresults to be clearly superior than a four asset SIB and close to the five asset SIBWe look at the two portfolios as a final comparison
Annual returns 1 year 3 years 5 years Bernstein No Brainer 10 -1 4 Bernstein Smart Money 10 -1 4 They are remarkably close to each other full comparison
Takeaways- Tactical Asset Allocation reduces downside risk and that wins in the current uncertain environment
- Both Bernstein portfolios perform satisfactorily for a lazy portfolio – it is surprising that the no-brainer performs so well against it’s more diversified smart-money cousin
- ETF’s can readily be used to implement these portfolios with good performance
labels:investment,
Symbols:BND,BWX,CIU,CSJ,DBC,DVY,EFA,EFG,EFV,EMB,GLD,HYG,IEF,IEI,IJJ,IJK,LQD,MBB,QQQQ,RWX,SCZ,SHY,TIP,VB,VBK,VBR,VEA,VNQ,VO,VTI,VTV,VUG,VWO,WIP,Portfolio-Building,with,ETFs,Closed-End,Funds,Commodity,ETFs,Currency,ETFs,Developed,Market,ETFs,
- Diversification, Style AND Asset Rotation Improve Portfolio Performance without Incurring Extra Risk
10/08/2010
- Three Asset Class Lazy Portfolios Reviewed
09/29/2010
- Schwab ETFs Review
07/27/2010
- Amber Waves of Pain: Commodities ETFs Are Killing Investors
07/26/2010
- Investing with Styles Can Pay off
07/09/2010
- Understanding and Building Your ETF Portfolio
06/27/2010
- The Mystery Advisers
06/09/2010
- David Swensen's Six Asset Investment Plan
06/09/2010
- Selecting Candidate ETFs for Effective Portfolio Building
06/03/2010
- Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan Report On 12/03/2010
12/03/2010
This report reviews Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account 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 Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan can achieve reasonable investment results using asset allocation strategies.
Plan Review and Rating
--
Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan's 401K plan consists of 55 funds. These funds enable participants to gain exposure to 5 major assets: US Equity, Foreign Equity, Commodity, Emerging Market Equity, Fixed Income. The list of minor asset classes covered:
Commodities Broad Basket: GSG, DBC
Conservative Allocation: AOK
Diversified Emerging Mkts: EEM, GMM, PXH, DEM, SCHE
Diversified Pacific/asia: EPP, VPL, GMF, PAF
Equity Energy: ITE, IXC, IPW, DBE, RYE, DKA
Europe Stock: IEV, VGK, PEF, DEB
Foreign Large Blend: EFA, VEU, GWL, PFA
Foreign Small/mid Growth: IFSM, VSS, SCHC
Health: IYH, IXJ, VHT, XBI, PBE, DBR, RYH
Inflation-protected Bond: TIP
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
Latin America Stock: ILF, GML
Long Government: TLT, TLH, IEF, EDV, VGLT, TLO, PLW
Mid-cap Value: IJJ, IWS, JKI, VOE, EMV, PWP, RFV, UVU
Multisector Bond: AGG, GBF, BND, LAG
Natural Resources: IYM, IGE, VAW, XLB, XME, PYZ, DBN, RTM, UYM
Pacific/asia Ex-japan Stk: EPP, AAXJ, GMF, PAF, DND
Short Government: SHY, SHV, VGSH, PLK, USY
Short-term Bond: CSJ, BSV, VCSH
Small Growth: IJT, IWO, JKK, VBK, DSG, PWT, RZG, UKK
Technology: MTK, PTF, DBT, RYT, ROM
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 (91%)
Fund Quality -- Rated as (48%)
Portfolio Building -- Rated as (84%)
Overall Rating: (75%)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 Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account 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 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 Dec 2, 2010)Performance table (as of Dec 2, 2010)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan Tactical Asset Allocation Moderate 6% 44% 7% 51% 16% 109% Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan Strategic Asset Allocation Moderate 12% 119% 3% 21% 9% 61% Four Core Asset ETF Index Funds Emerging Markets Tactical Asset Allocation Moderate 1% 6% 6% 49% 12% 78% Four Core Asset ETF Index Funds Emerging Markets Strategic Asset Allocation Moderate 10% 75% 2% 6% 7% 31% Currently, asset classes in Foreign Equity (EFA,VEU), Emerging Market Equity (EEM,VWO) and Fixed Income (AGG,BND) are doing relatively well. These asset classes are available to Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan participants.
To summarize, Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles.
Symbols: ATI , SPY , VTI , EFA , VEU , EEM , VWO , AGG , BND , DBC , AOK , CIU , BIV , IYH , IXJ , VHT , XBI , PBE , DBR , RYH , IYM , IGE , VAW , XLB , XME , PYZ , DBN , RTM , UYM , MTK , PTF , DBT , RYT , ROM , GWL , PFA , IVE , IWW , JKF , VTV , ELV , PWV , RPV , SCHV , IVV , IYY , IWV , VV , DLN , RSP , SCHX , 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 , IFSM , VSS , SCHC , GMM , PXH , DEM , SCHE , GBF , LAG , CSJ , BSV , VCSH , ITE , IXC , IPW , DBE , RYE , DKA , ILF , GML , IJT , IWO , JKK , VBK , DSG , PWT , RZG , UKK , TIP , EPP , VPL , GMF , PAF , AAXJ , DND , GSG
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