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, SCHX

As 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)

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, ,

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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.

We are now going to build a clone plan and see how it performs. We will simplify the choice and not duplicate styles.

US Funds

The US funds choice is very wide and here we will not mirror all the choices just one in each style category.

International Funds

Similarly we will match one style in each category in the international asset class.

Emerging markets

We select two emerging market ETF's to provide an alternative style.

Real Estate

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 Income

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)

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)

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,

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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

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:
 

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:

Performance chart (as of Oct 29, 2010)

Performance chart (as of Nov 1, 2010)

Performance table (as of Nov 1, 2010)

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,

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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.

We 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.

 
Full Details

• 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,

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10/19/2010

10/19/2010

10/09/2010

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09/26/2010

09/17/2010

09/16/2010

09/16/2010

07/09/2010

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)

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

12/03/2010

12/03/2010

12/03/2010

12/03/2010

12/03/2010

12/07/2010