11/02/2010

Kellogg Company is an internationally recognized brand in the ready-to-eat cereal and convenience foods. Its principal products include cookies, crackers, toaster pastries, cereal bars, fruit snacks, frozen waffles, and veggie foods.

Kellogg Company sells its products in North America, Europe, Latin America, and the Asia Pacific. The company was founded in 1906 and is headquartered in Battle Creek, Michigan.

Its retirement plan is a reflection of the company -- high quality funds but old style diversification. The 401K plan consists of 8 funds (not including cash). These funds give exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income. The list of minor asset classes covered:

In summary

• Six US equity funds -- including the company's own stock
• One international fund
• One fixed income fund

Having fewer US choices and more fixed income and international choices would provide better diversification as would adding real estate or emerging markets.

Investing in the company's own stock may show loyalty but it may be better to leave that to an employee stock purchase plan if they have it.

Comparable ETF's

Equity: VTI, VT 
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 
Small Growth: IJT, IWO, JKK, VBK, DSG, PWT, RZG, UKK 
Small Value: IJS, IWN, JKL, VBR, DSV, PWY, RZV, UVT 

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 below average (13%)
Fund Quality -- Rated as great (99%)
Portfolio Building -- Rated as average (47%)
Overall Rating: average (53%)

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 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 Oct 29, 2010)

Performance table (as of Oct 29, 2010)

The Kellogg 401K plan beats the 3 core asset SIB based on the quality of the funds and the ability to select multiple funds in the US category.

If we now compare it with a four asset ETF SIB it is possible to see the benefit of having the extra asset class even without the benefit of multiple funds in each asset class.



Even with excellent choices of funds, the returns can be beaten by a simple ETF portfolio with an extra asset class.

Kellogg gets strong marks for the choice of funds but are encouraged to add another asset class (or two) to really provide additional returns to their employees. 

labels:investment,

Symbols:SPY,VTI,EFA,VEU,AGG,BND,VT,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,IJS,IWN,JKL,VBR,DSV,PWY,RZV,UVT,IJT,IWO,JKK,VBK,DSG,PWT,RZG,UKK,

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10/28/2010

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10/24/2010

In this article, we will discuss Ford Motor 401K . 

Ford Motor Company (Ticker: F) designs, develops, manufactures, and services cars and trucks worldwide. It operates in two sectors, Automotive and Financial Services. Ford Motor Company was founded in 1903 and is based in Dearborn, Michigan. Ford is one of the pioneers in automobile industry.

Ford Motor 401K's 401K plan consists of 24 funds. These funds enable participants to gain exposure to 4 major assets: Us Equity , Foreign Equity ,REITs, Fixed Income . The list of minor asset classes covered:

Foreign Large Blend: EFA , VEU , GWL , PFA
Foreign Small/mid Growth: IFSM , VSS , SCHC
Global Real Estate: IFGL , RWX
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
Mid-cap Blend: IJH , IWR , JKG , VO , MDY , EMM , PJG , DON , EZM , MVV
Retirement Income:
Small Blend: IJR , IWM , JKJ , VB , DSC , PJM , DES , SAA , UWM , SCHA
Target Date 2016-2020: TZG
Target Date 2026-2030: TZL
Target Date 2036-2040: TZV
Target Date 2050+:
World Stock: IOO , VT

As of Oct 22, 2010, this plan 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 . It has the following detailed ratings:

Diversification -- Rated as above average (76%)
Fund Quality -- Rated as above average (69%)
Portfolio Building -- Rated as above average (71%)
Overall Rating: above average (72%)

The Fund Quality ranking is very reasonable. Its selection includes Fidelity Contrafund, Neuberger Berman Genesis Instl and Royce funds. 

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 )
Reits:( IYR or VNQ or ICF )
Fixed Income:( AGG or BND )

Performance chart (as of Oct 22, 2010)

Performance table (as of Oct 22, 2010)

Currently, asset classes in Us Equity( SPY , VTI ) , Foreign Equity( EFA , VEU ) , REITs ( IYR , VNQ , ICF ) and Fixed Income( AGG , BND ) are doing relatively well. These asset classes are available to Ford Motor 401K participants.

To summarize, Ford Motor 401K plan provides above average choices to its plan participants. As one of the major automobile manufacturers, Ford employees can benefit from such a plan to support their retirement needs.

labels:investment,

Symbols:F,SPY,VTI,EFA,VEU,IYR,VNQ,ICF,AGG,BND,CIU,BIV,GWL,PFA,IFGL,RWX,TZG,TZL,TZV,IVV,IYY,IWV,VV,DLN,RSP,SCHX,IOO,VT,IVW,IWZ,JKE,VUG,ELG,QQQQ,RPG,SCHG,IJH,IWR,JKG,VO,MDY,EMM,PJG,DON,EZM,MVV,IFSM,VSS,SCHC,IJR,IWM,JKJ,VB,DSC,PJM,DES,SAA,UWM,SCHA,TIP,ETF,Portfolio,Building,401K,

comments(1) 

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,

comments(0) 

09/17/2010

Frank Armstrong, author of The Informed Investor, proposed thisportfolio for an MSN Money article. The two key points of the portfolio are that it has four asset classes (US, International, REIT, Bonds) and relies on market indices rather than active management.

 

The portfolio uses index funds because index funds eliminate manager risk. It overweights small-cap stocks as small-cap stocks have historically outperformed large caps stocks. The portfolio has a strong value tilt, based on the theory that, over the long haul, beaten-down stocks will perform better than high-flying growth stocks.

This should be a low cost, well performing portfolio.

 

The fund selection for testing the strategy is listed below with the ETF alternatives:

  

• 9.25% in Vanguard Small Cap Value VISVX  (SCZ)
• 9.25% in Vanguard Value VIVAX (SPY, IYY)
• 6.25% in Vanguard Small-Cap Growth VISGX (VBK)
• 6.25% in Vanguard 500 Index VFINX (IVW) 
• 31% in Vanguard Total International Stock VGTSX (EFA)
• 8% in Vanguard REIT VGSIX   (IYR, VNQ, RWX)  
• 30% in Vanguard Short-Term Bond VBISX (BND, AGG)

 

Things to note about the portfolio:

• This is designed as a lazy portfolio with limited rebalancing specified
• With 70% in equities, this would be considered an aggressive portfolio
• REIT is possibly underweighted

 

We will create historical returns of this portfolio as originally planned and then compare against strategic asset allocation (annual rebalance) and tactical asset allocation. This will measure:

• The impact of equal weighting of the equities – bonds will be fixed at 30% -- SAA strategy
• The impact of actively managing the equities – bonds remain fixed at 30% -- TAA strategy

We will then introduce a four asset SIB which will give a measure of the choice of funds. The SAA and TAA strategies will give the same weights to each of the funds but use simpler asset classes funds.

 

4 Asset SIB Breakdown with ETF alternatives

LARGE BLEND                    VTSMX       (VTI)

Foreign Large Blend            VGTSX      (VEU)

REAL ESTATE                     VGSIX        (VNQ)

Intermediate-Term Bond       VBMFX      (BND)

 

 

The results are shown below. There are a number of interesting things to note

• The closest comparison of similar strategies is the Armstrong Original versus the Armstrong SAA. The Armstrong original outperforms SAA which says that overloading the US stocks towards small value is successful
• All of the buy and hold strategies suffer from the “downturn dip” and the tactical asset allocation strategies perform much better
• The difference between the two TAA strategies is negligible 

labels:investment,

Symbols:DIA,IYY,VTI,DVY,ONEQ,QCLN,QABA,PWC,VTV,VUG,IWM,IWO,IWW,MDY,IJJ,IJK,VO,AGG,BND,SHY,VBK,IJS,VBR,IWP,IWS,VEA,EFG,EFV,VWO,VEU,SCZ,SPY,IYR,IVW,RWX,EFA,VNQ,Tactical,Asset,Allocation,asset,allocation,armstong,ideal,index,strategic,asset,allocation,

comments(0) 

09/16/2010

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)

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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