 |
Vanguard ETF: |  |
7.4%* |
|
Diversified Core: | |
8.1%* |
|
Six Core Asset ETFs: | |
7.3%* |
Articles on IVV
- United Airlines Upgrades their 401K Plan
11/13/2010
We recently published a summary of the United Airlines 401K plan. Subsequent to this, United Airlines informed us that they have upgraded their plan in October 2010 and we now review the new plan.
The upgraded plan has 21 funds --little changed in number. These funds enable participants to gain exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income -- again the same as the last plan.We will compare the old and new funds as they both have similar composition.
Asset Class New Plan Old Plan U.S. Equity Excluding Company Stock 6 6 International Equity 2 2 Balanced Funds 3 4 Fixed Income 4 3 Target Date 5 6
As of Nov 11, 2010, the new plan's investment choice is rated as above average based on MyPlanIQ Plan Rating methodology that was designed to measure how effective a plan's available investment funds are.Plan Rating Attribute New Plan Old Plan Diversification 77% 43% Fund Quality 86% 20% Portfolio Building 76% 42% Overall Rating 79% 35%
This is a significant jump across the board without introducing a lot more funds. The key reasons for the improvement are:- US and international equities have large, medium and small cap alternatives whereas previously it was just large cap stock
- The fixed income choices are higher quality
This should be a well performing three asset class plan.
Performance chart (as of Nov 10, 2010)
Performance table (as of Nov 10, 2010)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe United Airlines Flight Attendant 401(k) Plan Tactical Asset Allocation Moderate 6% 53% 6% 67% 9% 92% United Airlines Flight Attendant 401(k) Plan Strategic Asset Allocation Moderate 8% 89% 0% -0% 5% 29% United Airline 401K Plan 2010 Tactical Asset Allocation Moderate 8% 92% 6% 78% 10% 114% United Airline 401K Plan 2010 Strategic Asset Allocation Moderate 12% 123% 3% 23% 8% 57%
If we now compare this to the Kellogg plan as we did in the last article:
Performance chart (as of Nov 11, 2010)Performance table (as of Nov 11, 2010)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe United Airline 401K Plan 2010 Tactical Asset Allocation Moderate 8% 92% 6% 78% 10% 114% United Airline 401K Plan 2010 Strategic Asset Allocation Moderate 12% 123% 3% 23% 8% 57% Kellogg 401k Plan Tactical Asset Allocation Moderate 2% 19% 4% 45% 8% 72% Kellogg 401k Plan Strategic Asset Allocation Moderate 13% 100% 3% 16% 8% 43% We can see that the United Plan now nudges ahead of the Kellog plan in terms of risk adjusted returns over the last five years.
Kudos to United in recognizing that their 401K plan needed to be improved and providing a free upgrade for its employees.
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,
- United Airlines 401K Flies Above the ETF Benchmark, But Below Kellogg
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 fundsIf 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.
Asset Class United Airlines Kellogg U.S. Equity Excluding Company Stock 6 5 International Equity 2 1 Balanced Funds 4 Fixed Income 3 1 Target Date 6
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, SCHXAs 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.
Plan Rating Attribute United Airlines Kellogg Diversification 43% 13% Fund Quality 20% 99% Portfolio Building 42% 47% Overall Rating 35% 53% 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 BNDPerformance chart (as of Nov 8, 2010)
click to enlarge
Performance table (as of Nov 8, 2010)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe United Airlines Flight Attendant 401(k) Plan Tactical Asset Allocation Moderate 8% 71% 6% 62% 10% 94% United Airlines Flight Attendant 401(k) Plan Strategic Asset Allocation Moderate 10% 103% 0% -3% 5% 30% Three Core Asset ETF Index Funds Tactical Asset Allocation Moderate 2% 19% 3% 29% 5% 48% Three Core Asset ETF Index Funds Strategic Asset Allocation Moderate 13% 106% 1% 3% 5% 21%
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)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe United Airlines Flight Attendant 401(k) Plan Tactical Asset Allocation Moderate 8% 71% 6% 62% 10% 94% United Airlines Flight Attendant 401(k) Plan Strategic Asset Allocation Moderate 10% 103% 0% -3% 5% 30% Kellogg 401k Plan Tactical Asset Allocation Moderate 4% 35% 4% 42% 8% 73% Kellogg 401k Plan Strategic Asset Allocation Moderate 15% 115% 3% 15% 8% 45% 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,
- 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,
- How Plan Rating Stack up Against ETF Portfolios Returns -- Part 2
11/02/2010
We are going to use our SIBs to explore plan rating so that it is clear how it works.
We will use a six asset SIB that has Vanguard market funds and a six asset SIB that has Vanguard ETF's. Both have one fund per asset class.Asset Class Index SIB ETF SIB U.S. Equity Excluding Company Stock VTSMX VTI International Equity VGTSX VEU Emerging Markets VEIEX VWO Real Estate VGSIX VNQ Commodities DBC DBC Fixed Income Including Money Market VBMFX BND The current ratings given to each SIB are listed below.
Plan Rating Attribute Index SIB ETF SIB Diversification 60% 60% Fund Quality 74% 39% Portfolio Building 85% 81% Overall Rating 74% 62%
We base the Diversification score on nine asset classes: US Equity, International Equity, Fixed Income, Real Estate, Commodities, Emerging Markets, International Bonds, High Yield Bonds, Balanced Funds. For each asset class, except for US Equity, the diversification score is highest to plans having 4-5 funds in each asset class as this allows the investor to find and use the best funds. For an application like MyPlanIQ, the more funds the better because it can search efficiently through a large number of alternatives but that is not true in the general case. The US is treated as a special case where the sweetspot is 7-8 funds as there are more classes and more opportunities for non-correlated benefits. Each of these asset classes are combined to give the overall diversification score.
Both SIBs score identically as they each have one fund in each asset class.We base Fund Quality score on 1Yr, 3Yr, 5Yr and Inception risk adjusted returns. We make a tradeoff between the recent and more distant past. As this is primarily for longer term investments we think that the three and five year returns are the most important and so have the highest weight.
The ETF SIB scores considerably lower than the index funds and that is because many of them don't have a long history and so their historical component is zero. Whereas this is unlikely to returns performance, it is important to recognize that funds with a longer history and give them a measure of preference.
We base the Portfolio Building score on how the funds can combine to give a robust portfolio with different classes and styles being able to interact to provide consistently good results in differing conditions. To achieve this, we use our own strategic asset allocation and tactical asset allocation strategies and perform a number of different simulations.
Both SIBs score approximately the same. There are some differences in the individual behaviors of the funds that make a slight difference but not enough to be significant.
Each one of these categories is then combined to create an overall score.
Now let's see how the rating stacks up against historical returns.
Performance chart (as of Oct 29, 2010)Performance table (as of Oct 29, 2010)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Six Core Asset ETFs Tactical Asset Allocation Moderate 13% 87% 8% 57% 17% 114% Six Core Asset ETFs Strategic Asset Allocation Moderate 14% 104% 2% 6% 9% 42% Six Core Asset Index Funds Tactical Asset Allocation Moderate 11% 84% 8% 65% 15% 117% Six Core Asset Index Funds Strategic Asset Allocation Moderate 13% 113% 1% 2% 8% 40%
As predicted, the index SIB performance is higher. If we compare the ratio of the TAA performance of the two SIB and the ratio of the performance of the Plan rating of the two SIBs we can see that the ratio of the rating and the 5 year returns follow a similar pattern -- more of this in the final article on this.
We see that the 5 year returns of the ETF SIB is higher that it's overall rating would initially predict but that is to be expected as we know that the fund quality was impacted by its history which won't, in fact, impact the returns for the period of time it was available.
labels:investment,Symbols:SPY,VTI,EFA,VEU,EEM,VWO,IYR,VNQ,ICF,AGG,BND,DBC,CIU,BIV,GWL,PFA,IVV,IYY,IWV,VV,DLN,RSP,SCHX,GMM,PXH,DEM,SCHE,GSG,
- 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,
- Kellogg 401K beats a 3 Asset Class ETF portfolio -- Can't beat the 4 asset class ETF portfolio
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- Schwab ETFs Review
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- Aflac Incorporated 401(k) Savings and Profit Sharing Plan Report On 12/03/2010
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)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Aflac Incorporated 401(k) Savings and Profit Sharing Plan Tactical Asset Allocation Moderate 4% 34% 5% 64% 8% 81% Aflac Incorporated 401(k) Savings and Profit Sharing Plan Strategic Asset Allocation Moderate 10% 100% 2% 8% 6% 31% Three Core Asset ETF Index Funds Tactical Asset Allocation Moderate -4% -35% 1% 9% 4% 27% Three Core Asset ETF Index Funds Strategic Asset Allocation Moderate 9% 60% -0% -3% 4% 13% 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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