![]() |
Vanguard ETF: | ![]() ![]() ![]() ![]() |
7.4%* |
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Diversified Core: | ![]() ![]() ![]() |
8.1%* |
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Six Core Asset ETFs: | ![]() ![]() ![]() |
7.3%* |
Articles on EFV
- American Express Provides Above Average Investment Choices in Its 401K Plan
12/06/2010
This report reviews AMERICAN EXPRESS RETIREMENT SAVINGS 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 AMERICAN EXPRESS RETIREMENT SAVINGS PLAN can achieve reasonable investment results using asset allocation strategies.
Plan Review and Rating
American Express Company provides charge and credit payment card products, and travel-related services worldwide. It offers a range of products and services, including charge and credit card products; expense management products and services; consumer and business travel services; stored value products, such as Travelers Cheques and prepaid products; network services; merchant acquisition, and merchant processing, point-of-sale, servicing and settlement, and marketing products and services for merchants; and fee services, including market and trend analyses along with related consulting services and customer loyalty and rewards programs. American Express was founded in 1850 and is headquartered in New York, New York.
AMERICAN EXPRESS RETIREMENT SAVINGS PLAN consists of 24 funds. These funds enable participants to gain exposure to 4 major assets: US Equity, Foreign Equity, Emerging Market Equity, Fixed Income. The list of minor asset classes covered:
Diversified Emerging Mkts: EEM, GMM, PXH, DEM, SCHE
Foreign Large Blend: EFA, VEU, GWL, PFA
Foreign Large Value: EFV, PID, DWM
Foreign Small/mid Value: SCZ
Intermediate-term Bond: AGG, CIU, BIV, BND
Large Blend: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX
Long-term Bond: CLY, LQD, BLV, VCLT
Mid-cap Blend: IJH, IWR, JKG, VO, MDY, EMM, PJG, DON, EZM, MVV
Small Blend: IJR, IWM, JKJ, VB, DSC, PJM, DES, SAA, UWM, SCHA
Us Equity: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHXAs of Dec 2, 2010, 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 (61%)
Fund Quality -- Rated as Average (60%)
Portfolio Building -- Rated as Good (96%)
Overall Rating: Above Average (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 AMERICAN EXPRESS RETIREMENT SAVINGS 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 AMERICAN EXPRESS RETIREMENT SAVINGS PLAN Tactical Asset Allocation Moderate 5% 50% 10% 100% 14% 124% AMERICAN EXPRESS RETIREMENT SAVINGS PLAN Strategic Asset Allocation Moderate 13% 108% 3% 16% 9% 49% 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 US Equity (SPY,VTI), Foreign Equity (EFA,VEU), Emerging Market Equity (EEM,VWO) and Fixed Income (AGG,BND) are doing relatively well. These asset classes are available to AMERICAN EXPRESS RETIREMENT SAVINGS PLAN participants.
To summarize, AMERICAN EXPRESS RETIREMENT SAVINGS PLAN plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles.
labels:investment,
Symbols:AXP,SPY,VTI,EFA,VEU,EEM,VWO,AGG,BND,IVV,IYY,IWV,VV,DLN,RSP,SCHX,CIU,BIV,GWL,PFA,SCZ,EFV,PID,DWM,IJH,IWR,JKG,VO,MDY,EMM,PJG,DON,EZM,MVV,IJR,IWM,JKJ,VB,DSC,PJM,DES,SAA,UWM,SCHA,GMM,PXH,DEM,SCHE,CLY,LQD,BLV,VCLT, ,
- ETF Cloning of the Schwab VA
11/30/2010
In a previous article noted that Variable Annuities have well chosen sub account funds that can lead to a portfolio that can deliver good returns. We now examine the Schwab Select Annuity, compare it with the Fidelity Personal Retirement Annuity and see how well an ETF clone performs
In Summary, the Fidelity Personal Retirement Annuity's plan consists of 56 funds. These funds enable participants to gain exposure to 5 major assets: US Equity, Foreign Equity, REITs, Emerging Market Equity and Fixed Income.Asset Class
Schwab Fidelity
US
35 13
International
5 5
Sector
3 12
Balanced
2 8
Fixed income
9 7
Emerging Markets
1 3
Real estate
1 1
Target Date
0 7
We are now going to build a clone plan and see how it performs. We will simplify the choice and not duplicate styles.
US FundsStyle Fidelity ETF LARGE BLEND
DGAGX KBCAX PIODX PJIAX SICWX SWHGX SWPPX
VTI
LARGE GROWTH
AAGOX JGIIX NMTBX SDGAX
VUG
LARGE VALUE
ACGMX ACSDX AVLIX KDCAX MEIIX
VTV
MID-CAP BLEND
GMCBX GTAVX RMVSX SOPVX
VO
Mid-Cap Growth
AMGOX BGRFX DFCIX TEGAX
IJK
Mid-Cap Growth
FMCCX
MID-CAP VALUE
ABASX
AVUA
IPVIXIJJ
SMALL BLEND
KDSAX
SMEIXVB
Small Growth PGOFX SIGWX SSDAX VBK Small Value CSSBX DEVLX FBVAX VBR
The US funds choice is very wide and here we will not mirror all the choices just one in each style category.
International FundsStyle Fidelity ETF World Stock
JWGRX
EFA
World Stock
OGLYX
VT
Similarly we will match one style in each category in the international asset class.
Emerging marketsStyle Fidelity ETF Emerging Markets
LZEMX
EEM
We select two emerging market ETF's to provide an alternative style.
Real EstateStyles Fidelity ETF REAL ESTATE
IYR
IYR, RWX
Real estate is under represented -- an international REIT would strengthen this asset class. We will add an international REIT Fund to the ETF's.
Fixed IncomeStyle Fidelity ETF Emerging Markets Bond
MSIEX
EMB
High Yield Bond
FHNIX
HYG
Inflation-Protected Bond
PRRIX
TIP
Intermediate-Term Bond
FBNDX
BND Intermediate-Term Bond
PTTRX
Cash
CASH
CASH Short-Term Bond
PTLDX
SHY
The fixed income class is well balanced with good choices and diversification. We match this with the exception of having a second intermediate term bond.
We are not attempting to match any of the balanced funds as there is no opportunity to use these in a standalone portfolio. While the managed funds are available, the fee structure is such that the returns are going to leak into other people's pockets and it will pay you to be on top of your own investments -- either directly or through a professional.
We now compare the returns of the two plans using tactical and asset allocation strategies with a moderate risk portfolio.Performance chart (as of Nov 19, 2010)
Performance table (as of Nov 19, 2010)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Fidelity Personal Retirement Annuity Tactical Asset Allocation Moderate 16% 113% 9% 78% 15% 115% Fidelity Personal Retirement Annuity Strategic Asset Allocation Moderate 15% 130% 4% 20% 7% 42% Fidelity-VA-Clone Tactical Asset Allocation Moderate 10% 69% 7% 58% 10% 75% Fidelity-VA-Clone Strategic Asset Allocation Moderate 12% 103% 1% 2% 5% 22%
The Variable Annuity Portfolios have a clear lead over its ETF clone. The reason for this is the larger number of funds to allow styles rotation.
In fact, to get similar performance using ETF's, you would need to go to one of the richest plans -- provided by TD Ameritrade. The comparison is below.Performance chart (as of Nov 19, 2010)
Performance table (as of Nov 19, 2010)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Fidelity Personal Retirement Annuity Tactical Asset Allocation Moderate 16% 113% 9% 78% 15% 115% Fidelity Personal Retirement Annuity Strategic Asset Allocation Moderate 15% 130% 4% 20% 7% 42% TD Ameritrade Commission Free ETFs Tactical Asset Allocation Moderate 11% 77% 12% 78% 19% 117% TD Ameritrade Commission Free ETFs Strategic Asset Allocation Moderate 8% 74% -0% -5% 7% 37%
One important note is that the returns are before fees are assessed. Variable annuities are complex instruments with fees that can be in excess of 2% of the asset base per year. Even so, the historical returns are good and there is the benefit that gains are not taxed.
Looking at the fund design for Variable Annuities can be instructive to allow you to build a plan that enables portfolios that give you good risk adjusted returns.labels:investment,
Symbols:AGG,AOK,AOM,BIV,BND,BSV,CIU,CSJ,DBC,DBE,DBN,DBR,DBT,DBU,DEM,DES,DGG,DKA,DLN,DON,DPN,DRF,DSC,DWM,EEM,EFA,EFG,EFV,ELG,ELV,EMG,EMM,EMV,EXI,EZM,GBF,GII,GMM,GWL,HYG,ICF,IGE,IJH,IJJ,IJK,IJR,IOO,IP,IPF,IPW,ITE,IVE,IVV,IVW,IWM,IWP,IWR,IWS,IWV,IWW,IWZ,IXC,IXJ,IXP,
- How Plan Rating Stack up Against ETF Portfolios Returns -- Part 3
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:Asset Class News Corp Funds New York Times Funds U.S. Equity Excluding Company Stock 3 6 International Equity 2 2 Emerging Markets 0 1 Fixed Income Including Money Market 2 2 Target Date Funds 0 11 Plan Rating Attribute News Corp New York Times Diversification 4% 64% Fund Quality 49% 90% Portfolio Building 65% 31% Overall Rating 42% 59% Performance table (as of Oct 29, 2010)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe News America (News Corp) 401k Savings Plan Tactical Asset Allocation Moderate 8% 67% 6% 62% 10% 92% News America (News Corp) 401k Savings Plan Strategic Asset Allocation Moderate 11% 130% 3% 18% 7% 44% THE NEW YORK TIMES COMPANIES SUPPLEMENTAL RETIREMENT AND INVESTMENT PLAN Tactical Asset Allocation Moderate 10% 85% 7% 62% 13% 114% THE NEW YORK TIMES COMPANIES SUPPLEMENTAL RETIREMENT AND INVESTMENT PLAN Strategic Asset Allocation Moderate 14% 135% 1% 2% 7% 44% 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.Asset Class TDA Funds Vanguard Funds U.S. Equity Excluding Company Stock 31 33 International Equity 14 6 Emerging Markets 11 1 Real Estate 4 1 Commodities 6 1 Sectors 3 9 Fixed Income Including Money Market 32 11 Plan Attribute TDA Vanguard Diversification 95% 57% Fund Quality 26% 56% Portfolio Building 92% 51% Overall Rating 73% 54% Performance chart (as of Oct 25, 2010): Performance table (as of Oct 25, 2010):
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Vanguard 62 Tactical Asset Allocation Moderate 14% 93% 5% 33% 13% 81% Vanguard 62 Strategic Asset Allocation Moderate 17% 126% 2% 5% 8% 42% TD Ameritrade Commission Free ETFs Tactical Asset Allocation Moderate 14% 96% 13% 84% 20% 128% TD Ameritrade Commission Free ETFs Strategic Asset Allocation Moderate 10% 89% -1% -10% 8% 44%
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,
- New York Times -- How Plan Rating Stack up Against ETF Portfolios -- Part 1
11/02/2010
This is the first of three articles where we are going to examine how plan rating can be used to give you additional insight into the properties of a plan (collection of funds) and how they may perform going forward.We have previously examined News Corp's 401K plan. We found that while it was lacking in terms of diversity, it performed well within its scope -- beating the 3 Asset SIB with which it was comparable but losing out to the 4 Asset SIB.
We will now look at the New York Times Company's 401K plan and establish it's performance before comparing the two and examining how each of their ratings gives insight as to their performance. All of MyPlanIQ's plans have ratings so this equally applies to any retirement, taxable, VA, 529 or any other sort of plan.
The New York Times Company, a leading media company with 2009 revenues of $2.4 billion, includes The New York Times, the International Herald Tribune, The Boston Globe, 15 other daily newspapers and more than 50 Web sites, including NYTimes.com,Boston.com and About.com. The Company's core purpose is to enhance society by creating, collecting and distributing high-quality news, information and entertainment.
The New York Times 401K plan consists of 23 funds. These funds enable participants to gain exposure to 4 major assets: US Equity, Foreign Equity, Emerging Market Equity, Fixed Income. The list of minor asset classes covered:
Asset Class Ticker Name Intermediate-Term Bond DODIX Dodge & Cox Income Foreign Large Value DODFX Dodge & Cox International Stock SMALL BLEND LRSCX Lord Abbett Small-Cap Value A LARGE GROWTH PNOYX Putnam New Opportunities Y Emerging Markets EMF Templeton Emerging Markets Fund LARGE BLEND VFINX Vanguard 500 Index Investor Moderate Allocation VAARX Vanguard Asset Allocation Adm LARGE GROWTH VHCOX Vanguard Capital Opportunity Foreign Large Blend VWIGX Vanguard International Growth Target Date 2000-2010 VTOVX Vanguard Target Retirement 2005 Target Date 2000-2010 VTENX Vanguard Target Retirement 2010 Target Date 2011-2015 VTXVX Vanguard Target Retirement 2015 Target Date 2016-2020 VTWNX Vanguard Target Retirement 2020 Target Date 2021-2025 VTTVX Vanguard Target Retirement 2025 Target Date 2026-2030 VTHRX Vanguard Target Retirement 2030 Target Date 2031-2035 VTTHX Vanguard Target Retirement 2035 Target Date 2036-2040 VFORX Vanguard Target Retirement 2040 Target Date 2041-2045 VTIVX Vanguard Target Retirement 2045 Target Date 2050+ VFIFX Vanguard Target Retirement 2050 Retirement Income VTINX Vanguard Target Retirement Income LARGE BLEND REASX Russell U.S. Core Equity I CASH CASH Money Market Summary
US Equity 6 funds
International Equity 2 funds
Emerging Markets 1 fund
Fixed income 1 fund
Target date 11 funds
If we exclude the target date funds as they can't be used to build a portfolio as they are a portfolio in and of themselves, there are ten funds, six of which are US based.
As of Oct 29, 2010, this plan investment choice is rated as 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 average (64%)
Fund Quality -- Rated as great (90%)
Portfolio Building -- Rated as below average (31%)
Overall Rating: average (59%)
The rating shows the lack of funds to really build a portfolio and that although there are four asset classes, two of them, most notably Fixed income, only have one fund each.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 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 BNDPerformance chart (as of Oct 29, 2010)
Performance chart (as of Nov 1, 2010)
Performance table (as of Nov 1, 2010)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe THE NEW YORK TIMES COMPANIES SUPPLEMENTAL RETIREMENT AND INVESTMENT PLAN Tactical Asset Allocation Moderate 10% 85% 7% 62% 13% 114% THE NEW YORK TIMES COMPANIES SUPPLEMENTAL RETIREMENT AND INVESTMENT PLAN Strategic Asset Allocation Moderate 14% 135% 1% 2% 7% 44% Four Core Asset ETF Index Funds Emerging Markets Tactical Asset Allocation Moderate 4% 36% 4% 34% 14% 90% Four Core Asset ETF Index Funds Emerging Markets Strategic Asset Allocation Moderate 13% 98% 0% -0% 8% 37% The results are mixed in the sense that the NYT portfolios outperform the SIBs in the one and three year categories but underperform the SIBs in the five year categories. The choice of multiple funds in the US and international equity categories will allow for styles rotation to find higher returns. However, in the other major categories there are only single options and the benefits of low fees and market index performance in the SIBs allow it to deliver higher performance.
To summarize having a four asset class portfolio is good. The number of funds in the plan is misleading as the target date funds don't assist in building a portfolio -- if you are a believer in target date funds then you have lots of choices. To further improve the portfolio, it is important to increase the fixed income choices immediately and then balance out emerging market choices from the US choices.
In the next article we will compare News Corp and New York Times to see how the plan rating numbers give insight to the quality of the overall plan.
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,
- TD Ameritrade Commission Free ETF’s Empowers Both Strategic and Tactical Asset Allocation
10/19/2010
The recent news that TD Ameritrade are providing over 100 ETF’s commission free is a perfect fit for a retirement portfolio. Investors are able to trade once a month and pick from a wide range of ETF’s without incurring any trading fees. Combine this with an IRA where the tax consequences of trading are removed and you have an almost ideal scenario and back tested returns demonstrate the point.
There is a continuing dilemma between wanting to increase returns while mitigating downside risk against the perceived risk of adopting a tactical asset allocation strategy. It is clear that tactical asset allocation consistently delivers higher returns at a lower risk. At the same time many are uncomfortable moving away from buy and hold which has been the mantra over the past twenty years.
In a previous article we introduced the notion of a core-satellite portfolio where the assets are split between tactical and strategic asset allocation strategies as a way of introducing tactical asset allocation in a step-by-step fashion.
TD Ameritrade making so many ETF’s available commission free allows another alternative to be considered and that is maintaining classic strategic asset allocation – i.e. all asset classes are fully represented at all times but with so many funds in each class, use fund momentum to rotate styles such that the funds in each asset class are regularly optimized.
CategoryJan-08Jan-09Jan-10Apr-10Jul-10Oct-10US EquitiesIWNVUG, MGKIWNVIGIWSVOInternational EquitiesEWJEWGEWJEWAAAXJAAXJEmerging MarketsEWZEWZEWZILFVWOVWOReal EstateVNQVNQVNQVNQVNQVNQCommoditiesDBCDBCDBCDBCDBCDBCBalanced FundAOKAOKAOKAOKAOKFixed IncomeSHY, WIP, JNKSHM, BWXSHY, WIP, JNKVCSH, BWX, JNKCASH, AGG, JNKCASH, AGG, JNKWe used the MyPlanIQ system to build and monitor a moderate risk (40% fixed income) strategic asset allocation portfolio. With five risk based asset classes, each of those classes would have 12% of the assets dedicated to them but the funds would be evaluated every month and the optimal fund selected based on the momentum within the class.
This can be compared with a Six asset SIB for which there is just one fund in each asset class.
From the performance chart, it is clear that there is increased upside potential from being able to switch funds within an asset class. Unfortunately, there is less ability to minimize downside risk when an asset class is under downward pressure.Despite this, for those who want to stay with a buy and hold in terms of asset classes, using this approach can squeeze some extra returns from the strategy.
With the large number of funds in six asset classes, momentum based asset allocation can be seen in its best light.
Portfolio Performance ComparisonPortfolio Name1Yr AR1Yr Sharpe3Yr AR3Yr Sharpe5Yr AR5Yr Sharpe13%87%13%86%20%128%10%83%-1%-6%9%46%11%93%1%5%8%40%Takeaways- ETF’s provide the basis for an outstanding portfolio with either strategic or tactical asset allocation. This is clearly demonstrated with TD’s wide range of commission free funds
- Using a web based application takes a lot of the effort from finding the best funds for either strategy
- Strategic asset allocation with styles rotation can deliver solid results using a well trusted strategy
- Tactical asset allocation greatly benefits from the large number of funds
labels:investment,
Symbols:GSG,DBC,AOK,EEM,GMM,PXH,DEM,SCHE,PCY,VTI,VT,IEV,VGK,PEF,DEB,EFA,VEU,GWL,PFA,EFG,EFV,PID,DWM,IFSM,VSS,SCHC,SCZ,IFGL,RWX,HYG,JNK,PHB,TIP,IEI,VGIT,ITE,AGG,CIU,BIV,BND,EWJ,JPP,PJO,DXJ,IVV,IYY,IWV,VV,SPY,DLN,RSP,SCHX,IVW,IWZ,JKE,VUG,ELG,QQQQ,RPG,SCHG,IVE,IWW,Commission,Free,ETFs,Strategic,Asset,Allocation,Tactical,Asset,Allocation,Asset,Allocation,styles,rotation,
- Lazy Portfolios -- The Playoffs II
10/19/2010
- Lazy Portfolios -- The Playoffs
10/19/2010
- Case Study: Hewlett Packard's 401K Plan
10/09/2010
- Bernstein's No Brainer and Smart Money Portfolios Reviewed
10/08/2010
- Diversification, Style AND Asset Rotation Improve Portfolio Performance without Incurring Extra Risk
10/08/2010
- Google’s 401K Plan: Another Good Employee Benefit
09/26/2010
- Armstrong Index Based Lazy Portfolio Returns Study
09/17/2010
- Getting Most out of Your Retirement Plan: A Case Study on Hewlett Packard 401K Plan
09/16/2010
- How Does Your Garden Grow?
09/16/2010
- Investing with Styles Can Pay off
07/09/2010
- AMERICAN EXPRESS RETIREMENT SAVINGS PLAN Report On 12/03/2010
12/03/2010
This report reviews AMERICAN EXPRESS RETIREMENT SAVINGS 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 AMERICAN EXPRESS RETIREMENT SAVINGS PLAN can achieve reasonable investment results using asset allocation strategies.
Plan Review and Rating
--
AMERICAN EXPRESS RETIREMENT SAVINGS PLAN's 401K plan consists of 24 funds. These funds enable participants to gain exposure to 4 major assets: US Equity, Foreign Equity, Emerging Market Equity, Fixed Income. The list of minor asset classes covered:
Diversified Emerging Mkts: EEM, GMM, PXH, DEM, SCHE
Foreign Large Blend: EFA, VEU, GWL, PFA
Foreign Large Value: EFV, PID, DWM
Foreign Small/mid Value: SCZ
Intermediate-term Bond: AGG, CIU, BIV, BND
Large Blend: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX
Long-term Bond: CLY, LQD, BLV, VCLT
Mid-cap Blend: IJH, IWR, JKG, VO, MDY, EMM, PJG, DON, EZM, MVV
Small Blend: IJR, IWM, JKJ, VB, DSC, PJM, DES, SAA, UWM, SCHA
Us Equity: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX
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 (61%)
Fund Quality -- Rated as (60%)
Portfolio Building -- Rated as (96%)
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 AMERICAN EXPRESS RETIREMENT SAVINGS 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 AMERICAN EXPRESS RETIREMENT SAVINGS PLAN Tactical Asset Allocation Moderate 5% 50% 10% 100% 14% 124% AMERICAN EXPRESS RETIREMENT SAVINGS PLAN Strategic Asset Allocation Moderate 13% 108% 3% 16% 9% 49% 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 US Equity (SPY,VTI), Foreign Equity (EFA,VEU), Emerging Market Equity (EEM,VWO) and Fixed Income (AGG,BND) are doing relatively well. These asset classes are available to AMERICAN EXPRESS RETIREMENT SAVINGS PLAN participants.
To summarize, AMERICAN EXPRESS RETIREMENT SAVINGS PLAN plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles.
Symbols: AXP , SPY , VTI , EFA , VEU , EEM , VWO , AGG , BND , IVV , IYY , IWV , VV , DLN , RSP , SCHX , CIU , BIV , GWL , PFA , SCZ , EFV , PID , DWM , IJH , IWR , JKG , VO , MDY , EMM , PJG , DON , EZM , MVV , IJR , IWM , JKJ , VB , DSC , PJM , DES , SAA , UWM , SCHA , GMM , PXH , DEM , SCHE , CLY , LQD , BLV , VCLT
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