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Articles on SPY

  • Dividend ETFs: Public REITs Offer Good Value While Economy Recovers

    03/04/2011

    Dividend ETFs performed well last week: leading the pack are the emerging market stocks (EEM) and emerging market dividend stocks (DEM), gaining 2.38% and 1.9% respectively. International REITs also did well, gaining 2.04%. For more detailed performance, please refer to here. 

    Among dividend ETFs, publicly traded REITs (IYR, ICF, VNQ) continue their strong showing: International REITs (RWX) rose most, now placed on the second spot while U.S. REITs ranked the 3rd in our weekly trend table for dividend REITs. 

     

    Assets Class Symbols 03/02
    Trend
    Score    		 02/23
    Trend
    Score    		 Direction
    SPDR S&P 500 SPY 10.12% 10.71% v
    SPDR DJ Wilshire Intl Real Estate RWX 10.04% 9.42% ^
    iShares Dow Jones US Real Estate IYR 10.0% 11.56% v
    Vanguard High Dividend Yield Indx VYM 9.39% 10.08% v
    iShares Dow Jones Intl Select Div Idx IDV 9.23% 9.51% v
    PowerShares Intl Dividend Achievers PID 9.12% 8.54% ^
    Vanguard Dividend Appreciation VIG 9.09% 9.73% v
    iShares MSCI EAFE Index EFA 8.35% 8.21% ^
    First Trust Value Line Dividend Index FVD 7.75% 7.75% v
    WisdomTree Emerging Market Equity Income DEM 7.59% 6.27% ^
    iShares Dow Jones Select Dividend Index DVY 7.38% 7.37% ^
    SPDR S&P Dividend SDY 7.14% 7.22% v
    PowerShares HighYield Dividend Achievers PEY 6.33% 6.16% ^
    iShares MSCI Emerging Markets Index EEM 5.21% 3.79% ^
    iShares S&P U.S. Preferred Stock Index PFF 3.4% 3.29% ^

    The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).

    The publicly traded REITs have been strong since the beginning of 2010. These commercial property management companied came out of the great recession with several advantages:

     

    • They were able to access to low interest rate capital. According to NAREIT, public REITs raised $47 billion in 2010, almost reached to the record capital raised in 2006 ($49 billion). What is more important is that in 2009, during the market low, they raised $34 billion. Using the low cost capital raised, they were able to take advantage of fire sales by private REITs that were overleveraged. 
    • Going forward, with economy recovering and the increasing bussiness activities, commercial rentals will increase, enabling REITs to increase their earnings. 

    The following table compares the performance of two portfolios using a tactical asset allocation strategy: Four Core Asset ETF (EM) Benchmark Tactical Asset Allocation Moderate has four candidate funds (SPY, EFA, EEM, AGG), representing four core assets (US. Equity, International Equity, Emerging Market Equity, Fixed Income). Five Core Asset Index ETF Funds Tactical Asset Allocation Moderate adds US REITs (IYR) as a fifth asset candidate. 

    Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
    Five Core Asset Index ETF Funds Tactical Asset Allocation Moderate 11% 97% 10% 85% 13% 85%
    Four Core Asset ETF (EM) Benchmark Tactical Asset Allocation Moderate 4% 47% 6% 53% 9% 53%

     

    The above clearly illustrates the advantage of REITs in portfolio building. It offers 4% extra annual return. This can be seen further by looking at the holdings of Five Core Asset Index ETF Funds Tactical Asset Allocation Moderate: it has held REITs (VNQ) since 12/2009, getting extra performance boost because of the out performance of REITs over other risk assets in the past one year.

    Symbols: RWX,SPY,IYR,VIG,IDV,VYM,EEM,PID,EFA,FVD,DVY,PEY,SDY,PFF,

    Disclosure:

    MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical. 

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  • Commodities Showed Their Hedge Amid Equity Weakness

    02/28/2011

    Last week, all major global stock markets registered loss: Frontier stocks (FRN) lost most -- -2.6%, followed by Emerging market stocks (VWO) -- -1.89%, and U.S. stock markets (VTI) -- -1.73%. REITs also showed their weakness. Commodities, however, showed their hedging nature, gaining 3.42%. Gold (GLD) gained 1.46%. Other fixed income ETFs all had positive gains too.  For more detailed performence update, please refer to here.

    The following table shows the trend scores for all major asset classes we monitor. 

     

    Assets Class Symbols 02/25
    Trend
    Score    		 02/18
    Trend
    Score    		 Direction
    Commodities DBC 16.74% 13.62% ^
    US Stocks VTI 13.05% 14.82% v
    US Equity REITs VNQ 12.41% 14.34% v
    International REITs RWX 11.37% 11.76% v
    Gold GLD 9.84% 8.93% ^
    International Developed Stks EFA 9.77% 10.71% v
    Emerging Market Stks VWO 7.08% 7.87% v
    US High Yield Bonds JNK 5.55% 5.5% ^
    International Treasury Bonds BWX 2.85% 2.86% v
    Frontier Market Stks FRN 1.08% 2.41% v
    US Credit Bonds CFT 0.76% 0.38% ^
    Emerging Mkt Bonds PCY 0.07% -0.07% ^
    Treasury Bills SHV 0.03% 0.01% ^
    Total US Bonds BND -0.04% -0.49% ^
    Intermediate Treasuries IEF -0.52% -1.33% ^
    Municipal Bonds MUB -1.08% -1.17% ^
    Mortgage Back Bonds MBB -1.21% -1.51% ^

    The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).

    We pointed out the role of commodities in asset allocation of a portfolio several months ago. The following table shows the performance of two portfolios using a tactical asset allocation strategy: one has five core asset classes, eash of which is represetned by a single ETF,  as its candidate funds: U.S. equity (VTI, SPY), Foreign equity (VEU, EFA), Emerging market equity (VWO, EEM), U.S. REITs (IYR, VNQ) and fixed income (BND, AGG). The other has six core assets that includes an additional commodity index ETF (DBC) as its sixth asset.

    The following table compares the performance of two moderate portfolios for these two plans. 

    Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
    Six Core Asset ETFs Tactical Asset Allocation Moderate 16% 120% 10% 82% 15% 100%
    Five Core Asset Index ETF Funds Tactical Asset Allocation Moderate 13% 97% 10% 85% 13% 85%
     

    It is clear that adding commodity as a candidate asset for an asset allocation strategy does increase the return and Sharpe ratio (thus, risk adjusted return). However, to achieve this, one should follow a systematic asset allocation strategy like the one mentioned above and handle commodity and other asset classse exposures carefully. 

    Disclosure:

    MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.

    Symbols: EEM,VNQ,FRN,VWO,IYR,ICF,GLD,RWX,VTI,SPY,IWM,PCY,EMB,JNK,HYG,PHB,EFA,VEU,IEF,TLT,GSG,DBC,DBA,CFT,BWX,MBB,BND,MUB,SHV,AGG,

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  • Shell Versus Morningstar -- More is Better

    02/27/2011

    We recognize that technology continually changes the world charging into every aspect of our lives. Investing has also been significantly changed with instant access to news and the lead measured in milliseconds. Significant swings of the market can be impacted by the touch of a button.

    For the longterm or retirement investor, the impact is more muted but still present and with the emergence of new investing apps, perhaps a larger change is occurring. Historically, plans for the long term investor have been limited to a relatively few funds, hopefully well chosen to give an easily comprehensable set of choices that still enable the creation of a strong portfolio to deliver good returns.

    We have already reported on what we think is one of the best --Morningstar's 401K plan has only 26 funds that give access to six major assst classes. Based on MyPlanIQ's Plan Rating methodologythey achieve top ratings. This is about as good as it gets -- good diversification, great choice of funds, ability to create a non correlated portfolio and strong historical returns.

    However, if we have access to applications that will automatically sift and sort a large number of funds, do we need to limit the number of funds in a plan?

    To contrast this, we also reviewed a Shell 401k Plan which offers an extraordinary number of funds -- which we compare with the Morningstar alternatives.

    Asset Class

    Shell

    Morningstar
    Balanced Fund 28 1
    REITs 3 1
    Fixed Income 43 6
    Commodity 0 1
    Sector Fund 40 1
    Foreign Equity 31 2
    Emerging Market Equity 8 2
    US Equity 143 11
    Other 7 1
    Total 303 26

    Without a technological solution, the number of funds in the Shell plan is overwhelming, but if there is an application to sort and select, more funds can actually be better.

    We can compare the rating of both plans.

    AttributeShellMorningstar
    Diversification Great (98%) Great (96%)
    Fund Quality Average (37%) Average (72%)
    Portfolio Building Great (88%) Great (96%)
    Overall Rating Above Average (76%) Above Average (89%)

    The Shell plan wins in diversification by having excellent coverage of the five main asset classes and some of the sub-classes which contribute to better returns. Morningstar is close behind with one more major asset class but less coverage of the secondary styles.

    Morningstar funds are higher quality making it easier to select a strong portfolio which makes it easier to build a portfolio and hence Morningstar comes out on top in the ratings.

    If we now compare historical results of the two plans:


    Performance table (as of Feb 23, 2011)

    Portfolio Name1Yr AR1Yr Sharpe3Yr AR3Yr Sharpe5Yr AR5Yr Sharpe
    Royal Dutch Shell Tier III 401K Tactical Asset Allocation Moderate 9% 110% 11% 108% 14% 111%
    Royal Dutch Shell Tier III 401K Strategic Asset Allocation Moderate 13% 183% 2% 15% 5% 29%
    Morningstar Inc 401K Plan Tactical Asset Allocation Moderate 21% 170% 13% 125% 14% 127%
    Morningstar Inc 401K Plan Strategic Asset Allocation Moderate 14% 179% 3% 25% 5% 36%

    We see that in the five year time horizon, the performance of the plans are nearly identical -- note that the Sharpe index is higher for the Morningstar plan.

    This nicely contrasts the brute force and elegant approach to retirement fund planning.

    What we see going forward are more and more ETF plans with many alternatives in them (Vanguard has 64, TD Ameritrade has 101) that offer more of the brute force alternatives.

    With investing apps to sort and rank the choices, this should enable investors to leverage these plans to get good returns at a low cost.

    Disclosure:

    MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.

     

    Symbols:SPY,VTI,EFA,VEU,EEM,VWO,IYR,VNQ,ICF,AGG,BND,DBC,HYG,JNK,PHB,AOM,CIU,BIV,GWL,PFA,IVE,IWW,JKF,VTV,ELV,PWV,RPV,SCHV,EFV,PID,DWM,IYF,VFH,IPF,PFI,DRF,RYF,IVV,IYY,IWV,VV,DLN,RSP,SCHX,SHY,SHV,VGSH,PLK,USY,IVW,IWZ,JKE,VUG,ELG,QQQQ,RPG,SCHG,IJJ,IWS,JKI,VOE,EMV,PWP,RFV,UVU,IJS,IWN,JKL,VBR,DSV,PWY,RZV,UVT,IJR,IWM,JKJ,VB,DSC,PJM,DES,SAA,UWM,SCHA,GMM,PXH,DEM,SCHE,GBF,LAG,CSJ,BSV,VCSH,IJK,IWP,VOT,EMG,PWJ,RFG,UKW,TIP,GSG,

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  • Energy Commodities and Gold Strong: Gold's Role in Asset Allocation

    02/26/2011

    Last week saw a typical volatile reaction in commodity prices during international turbulence: the violence in Libya was a major cause for energy commodities' ascent. It was believed that the uncertain situation in Libya, one of the major oil producers, would stress oil supplies. In the week, U.S. oil (USO) shot up 9.13%, energy ETF (DBE) gained 6.6%. 

    Precious metals functioned again during such a volatile event: Gold (GLD) gained 1.46% while precious metal ETF (DBE) gained 1.76%. For more detailed performance update, please refer to here.

    Assets Class Symbols 02/25
    Trend
    Score    		 02/18
    Trend
    Score    		 Direction
    Silver SLV 44.61% 45.2% v
    Agriculture DBA 18.17% 18.71% v
    Energy DBE 17.3% 10.83% ^
    Commodity DBC 16.74% 13.62% ^
    Precious Metals DBP 15.56% 14.73% ^
    Base Metals DBB 13.17% 13.41% v
    Gold GLD 9.84% 8.93% ^
    US Oil USO 9.09% 0.88% ^
    Natural Gas UNG -13.96% -20.35% ^

    The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).

    A natural question arises from such an event: going forward, are precious metals better positioned than energy commodities as hedges? We make the following observations:

    • Oil and other energy commodties, on the other hand, are very much tied to shocking events that may have concerns on their supply. They are more closely tied to short term political and geographical developments, making them very reactionary to such events. 
    • In the current environment, because of massive monetary stimulus by global governments, investors are conditioned by the fact that the world will eventually enter a high inflationary period (inflationary expectation, not current inflation). Paper currencies are no longer trusted. Such a belief makes precious metals (gold (GLD) or silver (SLV)) as sought after assets. They are more likely go up in any stressful future event. 

     In the following, we compared with the two portfolios that use a tactical asset allocation strategy. Both have broadbase commodity index DBC as a candidate fund. But one has additional gold GLD ETF. The MyPlanIQ Diversified Core Allocation ETF Plan Tactical Asset Allocation Moderate is one of the model portfolios in MyPlanIQ Diversified Core Allocation ETF Plan. The plan consists of 35 funds. It covers 6 major asset classes and 28 minor asset classes. The major asset classes it covers are US Equity, Foreign Equity, Emerging Market Equity, REITs, Commodity and Fixed Income.

    Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
    MyPlanIQ Diversified Core Allocation ETF Plan Tactical Asset Allocation Moderate No Gld 14% 114% 8% 66% 12% 84%
    MyPlanIQ Diversified Core Allocation ETF Plan Tactical Asset Allocation Moderate 16% 123% 9% 73% 13% 90%


    From the above table, adding gold GLD to the commodity asset class adds extra 1% annualized return in the last 1, 3 and 5 years. It also enhances portfolio Sharpe ratios. 

    Symbols: SLV,DBP,GLD,DBB,DBA,DBC,DBE,USO,UNG,SPY,QQQQ,IWM,MDY,EFA,VEU,EEM,VWO,IYR,ICF,VNQ,GSG,LQD,CSJ,CIU,HYG,JNK,PHB,TLT,IEF,SHY,SHV,BND,AGG,MUB,MBB,

    Disclosure:

    MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical. 

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  • Dividend Stock ETFs All Dropped, But Showing Defensive

    02/24/2011

    Investors got a wake up call this week after the President's day: for the past two days, S&P has dropped 2.6%. We reviewed dividend stock ETFs performance in the following three equity classes:

    • U.S. Equity: U.S. dividend stock ETFs appeared resilient among the market correction. For the past one week, for example, Vanguard High Dividend Yield Index (VYM) had the least loss: -0.68%, compared with SPY's 2.11% loss. In general, all U.S. dividend stock ETFs (SDY, FVD, DVY, VIG) outperformed the S&P 500 benchmark (SPY), showing that in general, dividend ETFs are more defensive during market stress. 
    • International Equity: similarly, Powershwares International Dividend Achievers (PID) lost only 0.69%, compared with MSCI's broadbase index EFA's 2.07% loss in the last 5 days.
    • Emerging Market Equity: WisdomTree's Emerging Market Income (DEM) lost 1.57%, compared with broadbase index EEM's 2.18% loss.

    Preferred stocks showed the least loss (-0.48%) among all the dividend ETFs we monitored. For more detailed performance, please refer to here.

     

    The following table shows the trend scores for dividend ETFs. U.S. REITs (IYR), U.S. stocks (SPY) and U.S. dividend stocks (VYM, VIG) are retaining the top spots. Emerging market equity (EEM) and preferred stocks (PFF) are still at the bottom.

     

    Assets Class Symbols 02/23
    Trend
    Score    		 02/16
    Trend
    Score    		 Direction
    iShares Dow Jones US Real Estate IYR 11.56% 14.05% v
    SPDR S&P 500 SPY 10.71% 13.17% v
    Vanguard High Dividend Yield Indx VYM 10.08% 10.94% v
    Vanguard Dividend Appreciation VIG 9.73% 10.79% v
    iShares Dow Jones Intl Select Div Idx IDV 9.51% 10.3% v
    SPDR DJ Wilshire Intl Real Estate RWX 9.42% 9.83% v
    PowerShares Intl Dividend Achievers PID 8.54% 8.66% v
    iShares MSCI EAFE Index EFA 8.21% 9.65% v
    First Trust Value Line Dividend Index FVD 7.75% 8.83% v
    iShares Dow Jones Select Dividend Index DVY 7.37% 8.72% v
    SPDR S&P Dividend SDY 7.22% 8.9% v
    WisdomTree Emerging Market Equity Income DEM 6.27% 7.05% v
    PowerShares HighYield Dividend Achievers PEY 6.16% 8.1% v
    iShares MSCI Emerging Markets Index EEM 3.79% 4.99% v
    iShares S&P U.S. Preferred Stock Index PFF 3.29% 4.06% v

    The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).

    We would like to point out that more U.S. companies are expected increase their dividend payout in 2011. In a recent report by CNBC, Senior analyst Howard Silverblatt in S&P indices stated "We estimate that over half the S&P 500 issues will pay out more in regular cash payments in 2011 than they paid in 2010," Given the current anemic economic recovery, positioning the U.S. equity portion of one's portfolio in dividend stock ETFs is a good strategy with certain defensive nature.

    In fact, in the last one year, investing in dividend ETFs has slightly outperformed a strategy that invests in broadbase indices. The following table shows the performance comparison between an income focused portfolio and a general market index focused portfolio, both using a tactical asset allocation strategy.

    Portfolio Performance Comparison

    Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
    Five Core Asset Index ETF Funds Tactical Asset Allocation Moderate 12% 100% 10% 85% 12% 87%
    Retirement Income ETFs Tactical Asset Allocation Moderate 13% 102% 9% 76% 10% 69%



    Barring from a severe debt induced financial event in global markets, we view investors should pay more attention to dividend ETFs in the coming years for defensive and growth purposes.

    Symbols:RWX,SPY,IYR,VIG,IDV,VYM,EEM,PID,EFA,FVD,DVY,PEY,SDY,PFF,

    Disclosure:

    MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.

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  • Initiating Tracking of US Subclasses

    02/22/2011

  • Major Asset Trends: U.S. Stocks and REITs Strong, International Bonds Worth Considering

    02/22/2011

  • Commodity ETF Trends: Silver Breaks Out, Gold Steady Amid Commodity Strength

    02/20/2011

  • E-Trade ETF Plan Hits Most of the High Notes

    02/16/2011

  • Major Asset Trends: Divergence of U.S. Stocks and Emerging Market Stocks Continues

    02/14/2011

  • RSP Leads US Large Cap Blend Equities

    02/14/2011

  • Beware of Divergence Among Energy Commodity ETFs

    02/14/2011

  • Rising Energy Costs: Casting a Cloud over Energy-Dependent Sector ETFs

    01/15/2011

  • JPMorgan Chase -- Top Tier Company -- Second Tier Retirement Plan

    01/15/2011

  • Asset Allocation: Focus Risk on Long Duration Bonds

    01/14/2011

  • 'Buffett Ratio' for Stock Market Valuation Up 7% Since November

    01/14/2011

  • Country ETFs Flat or Modestly Down While Spain Flounders

    01/12/2011

  • You Can Do Better Than Your Pension Funds

    01/12/2011

  • Risk Chase Slows Down: A Good Time to Review Your Portfolios

    01/10/2011

  • FEDEX Doesn't Deliver on It's Retirement Plan

    01/07/2011

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