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Articles on DPN

  • Good Professor Siegel's WisdomTree ETF Lazy Portfolio Is Not That Good

    06/08/2011

    Paul Farrell at MarketWatch.com first proposed this portfolio in 2007. This portfolio uses all WisdomTree's fundamental weighted ETFs. Jeremy Siegel, a Yale Professor, is instrumental in constructing these ETFs. The following is the list of funds:

    - 20% in DEFA Index (DWM)
    - 15% in Total Dividend Index (DTD)
    - 15% in Earnings Index (EXT)
    - 10% in High-Yield Equity Index (DHS)
    - 10% in DEFA High-Yield Equity Index (DTH)
    - 10% in International Energy Sector (DKA)
    - 10% in International Consumer Non-Cyclical Index (DPN)
    - 10% in Low P/E Index (EZY)

    You can also find more information on Kirk's Report here.

    These funds cover 2 major assets: US Equity, Foreign Equity.

    The follow table compares the performance of the original portfolio (it is rebalanced annually) with those of strategic and tactical asset allocation portfolios with risk profile 0 (i.e. all equities). It is clear that the tactical asset allocation portfolio outperformed both the original and the strategic asset allocation.

    Portfolio Name Strategy 1Yr AR 3Yr AR 5Yr AR
    Strategic Asset Allocation 28% -2% 2%
    Tactical Asset Allocation 4% 2% 5%
    STATIC 13% -2%

    What is more interesting is that the original portfolio underperformed S&P 500 (SPY) (VFINX). The following table shows the comparison:

    Annualized Return

    Name

    Last 1 Year

    Last 3 Years

    Last 5 Years

    Professor Siegel`s Lazy WisdomTree ETFs Original Portfolio 13% -1%
    VFINX (Vanguard (S&P 500) Index) 20% 0% 2%
    VBINX (Vanguard Balance (60% stocks/40% bonds) 15% 4% 5%


    The first week of June has shown the continuously weakened stock markets reacted to a stream of bad economic news: the 9.1% unemployment rate, the disappointing ISM manufacturing survey and the double dip housing prices. Major risk asset prices were divergent, with U.S. stocks showing the major weakness. Fixed income markets continued to be strong.

    • Among risk assets, commodities (DBC) (GLD) and international and U.S. REITs (RWX) (IYR) are still ranked at the top. 
    • Emerging market and developed market stocks (VWO) (EFA) actually edged out some gain. 
    • International treasury bond (BWX) is now ranked higher than both international and U.S. stocks now. 

    Fundamentally, we believe major problems that caused the financial crisis have not been fixed. We are in a long period of re-adjustment. For a long term or retirement investor, it is thus important to adjust portfolios accordingly.

    To summarize, the WisdomTree ETFs portfolio proposed by Professor Siegel is not performing well. Investors should keep watchful eyes on some of those so called lazy portfolios and do their own due diligence.

    Exchange Tickers: (DWM), (DTD), (EXT), (DHS), (DTH), (DKA), (DPN), (EZY), (VTI), (VEU), (BND)

    Symbols: DWM, DTD, EXT, DHS, DTH, DKA, DPN, EZY, VTI, VEU, BND, SPY, EFA

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  • Schwab Select ETF Plan Has Bright Prospects

    04/06/2011

    Schwab ETF Plan Has Good Pedigree and Bright Prospects Retirement is now a "hair on fire" problem. There is much talk of working longer, downsizing, living on less. However, there is something you can do to help improve your risk adjusted returns. Look at your portfolios and plans to build a diversified portfolio with a systematic investment strategy.

    This is not as hard as you might think -- to highlight this point, we feature a plan created by a non professional that matches up well with any of the other plans. Kevin Carr. is an individual investor who employs a long term strategy. He manages an individual common stock portfolio as well as many plans on MyPlan IQ.  If you have any questions regarding this plan please contact him.

    This plan provides you with Schwab's experts’ top picks of low-cost ETFs representing approximately 50 ETFs, based on rigorous criteria including expenses, tracking error, trading volume, and more.  Schwab ETFs trade commission free.  There are no redemption periods so you can start today and not worry about holding periods.

    We report on this Schwab ETF Select List which consists of 49 funds. These funds give exposure to 6 major assets: US Equity, Commodity, Foreign Equity, REITs, Emerging Market Equity, Fixed Income.

     

    Asset Class Ticker Name
    LARGE BLEND SCHX Schwab U.S. Large-Cap ETF
    LARGE GROWTH SCHG Schwab U.S. Large-Cap Growth ETF
    LARGE VALUE SCHV Schwab U.S. Large-Cap Value ETF
    MID-CAP BLEND VO Vanguard Mid-Cap ETF
    Mid-Cap Growth VOT Vanguard Mid-Cap Growth ETF
    MID-CAP VALUE VOE Vanguard Mid-Cap Value ETF
    SMALL BLEND SCHA Schwab U.S. Small-Cap ETF
    Small Growth VBK Vanguard Small Cap Growth ETF
    SMALL VALUE VBR Vanguard Small Cap Value ETF
    LARGE BLEND SCHB Schwab U.S. Broad Market ETF
    LARGE VALUE VYM Vanguard High Dividend Yield Indx ETF
    Foreign Large Blend SCHF Schwab International Equity ETF
    Foreign Large Growth EFG iShares MSCI EAFE Growth Index
    Foreign Large Value EFV iShares MSCI EAFE Value Index
    FOREIGN SMALL/MID GROWTH SCHC Schwab International Small-Cap Eq ETF
    DIVERSIFIED EMERGING MKTS SCHE Schwab Emerging Markets Equity ETF
    Foreign Large Blend VEU Vanguard FTSE All-World ex-US ETF
    WORLD STOCK VT Vanguard Total World Stock Index ETF
    EUROPE STOCK VGK Vanguard European ETF
    DIVERSIFIED PACIFIC/ASIA VPL Vanguard Pacific Stock ETF
    JAPAN STOCK EWJ iShares MSCI Japan Index
    China Region GXC SPDR S&P China
    Intermediate-Term Bond BND Vanguard Total Bond Market ETF
    SHORT GOVERNMENT SCHO Schwab Short-Term U.S. Treasury ETF
    Intermediate Government SCHR Schwab Intermediate-Term U.S. Trsy ETF
    LONG GOVERNMENT TLH iShares Barclays 10-20 Year Treasury Bd
    Inflation-Protected Bond SCHP Schwab U.S. TIPS ETF
    Intermediate-Term Bond CIU iShares Barclays Intermediate Credit Bd
    High Yield Bond JNK SPDR Barclays Capital High Yield Bond
    WORLD BOND BWX SPDR Barclays Capital Intl Treasury Bond
    Muni National Long MUB iShares S&P National AMT-Free Muni Bd
    Consumer Discretionary XLY Consumer Discret Select Sector SPDR
    Consumer Staples XLP Consumer Staples Select Sector SPDR
    Equity Energy XLE Energy Select Sector SPDR
    Financial XLF Financial Select Sector SPDR
    Health XLV Health Care Select Sector SPDR
    Industrials XLI Industrial Select Sector SPDR
    Natural Resources XLB Materials Select Sector SPDR
    Technology XLK Technology Select Sector SPDR
    Communications IYZ iShares Dow Jones US Telecom
    Utilities XLU Utilities Select Sector SPDR
    COMMODITIES BROAD BASKET DBC PowerShares DB Commodity Index Tracking
    Commodities Agriculture DBA PowerShares DB Agriculture
    Commodities Precious Metals IAU iShares Gold Trust
    Commodities Industrial Metals DBB PowerShares DB Base Metals
    Commodities Energy USL United States 12 Month Oil
    MISCELLANEOUS SECTOR PFF iShares S&P U.S. Preferred Stock Index
    REAL ESTATE VNQ Vanguard REIT Index ETF


     

    Asset Class Number of funds
    Balanced Fund 0
    REITs 1
    Fixed Income 9
    Commodity 5
    Sector Fund 11
    Foreign Equity 8
    Emerging Market Equity 3
    US Equity 11
    Other 1
    Total 49

    Many are looking for access to a well rounded ETF plan through Schwab. This fills this hole and as Schwab makes more of their own funds available, it will be possible to move them into the plan. On this review, the only comment would be to add another REIT choice. The other asset classes have a good number of selections without being overwhelming.

    As of Apr 4, 2011, 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 great (99%)
    Fund Quality -- Rated as average (47%)
    Portfolio Building -- Rated as average (56%)
    Overall Rating: above average (66%)

    Thehigh diversification score means that all the major and minor asset classes have been ticked. Fund quality is lower because some of the ETF's don't have a long history but that shouldn't impede the ability for the future.

    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 6 asset SIB (Simpler Is Better) plan . This SIB plan has the following candidate index funds and their ETFs equivalent:

    US Equity: SPY or VTI
    Commodity: DBC
    Foreign Equity: EFA or VEU
    REITs: IYR or VNQ or ICF
    Emerging Market Equity: EEM or VWO
    Fixed Income: AGG or BND
    Performance chart (as of Apr 4, 2011)

    Performance table (as of Apr 4, 2011)

    Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
    Schwab ETF Select List Tactical Asset Allocation Moderate 9% 82% 8% 72% 12% 89%
    Schwab ETF Select List Strategic Asset Allocation Moderate 14% 118% 3% 15% 4% 20%
    Six Core Asset ETF Benchmark Tactical Asset Allocation Moderate 9% 81% 10% 82% 13% 89%
    Six Core Asset ETF Benchmark Strategic Asset Allocation Moderate 14% 121% 4% 20% 7% 34%


    This portfolio performs well against the six asset ETF benchmark

    • SAA provides lower volatility while albeit delivering lower historical returns but as more of the newer funds are applied to the portfolio, there will be more opportunity for closing the gap
    • The TAA portfolios run neck and neck over the five year period

    In a future article, we will review performance over the last three months to see how the plan has performed in the light of recent events.

    Kay Takeaways

    • Building a plan of funds is not the preserve of the few -- anybody who has the interest and application to research can provide well constructed plans
    • It is possible to benefit from those individuals while still having transparency and not being captive to any particular broker

    Symbols: SPY, VTI, EFA, VEU, EEM, VWO, IYR, VNQ, ICF, AGG, BND, DBC, HYG, JNK, PHB, CIU, BIV, MUB, TFI, PZA, MLN, GII, PUI, DBU, RYU, UPW, IYH, IXJ, VHT, XBI, PBE, DBR, RYH, EFG, IXP, PTE, DGG, LTL, IYM, IGE, VAW, XLB, XME, PYZ, DBN, RTM, UYM, MTK, PTF, DBT, RYT, ROM, GWL, PFA, IVE, IWW, JKF, VTV, ELV, PWV, RPV, SCHV, EFV, PID, DWM, IYF, VFH, IPF, PFI, DRF, RYF, KXI, VDC, PSL, DPN, RHS, RXI, VCR, IYJ, EXI, VIS, IGOV, BWX, WIP, IVV, IYY, IWV, VV, DLN, RSP, SCHX, IOO, VT, SHY, SHV, VGSH, PLK, USY, TLT, TLH, IEF, EDV, VGLT, TLO, PLW, IEV, VGK, PEF, DEB, IVW, IWZ, JKE, VUG, ELG, QQQQ, RPG, SCHG, IJJ, IWS, JKI, VOE, EMV, PWP, RFV, UVU, IJH, IWR, JKG, VO, MDY, EMM, PJG, DON, EZM, MVV, IFSM, VSS, SCHC, IJS, IWN, JKL, VBR, DSV, PWY, RZV, UVT, IJR, IWM, JKJ, VB, DSC, PJM, DES, SAA, UWM, SCHA, GMM, PXH, DEM, SCHE, ITE, IXC, IPW, DBE, RYE, DKA, IEI, VGIT, IJK, IWP, VOT, EMG, PWJ, RFG, UKW, IJT, IWO, JKK, VBK, DSG, PWT, RZG, UKK, TIP, EPP, VPL, GMF, PAF, EWJ, JPP, PJO, DXJ, GSG

    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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  • Vanguard VA Has Some Rules and Can Be Cloned with an ETF Portfolio

    12/08/2010

    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 Vanguard Variable Annuity and see how well an ETF clone performs

    The Vanguard Variable Annuity consists of 15 funds. These funds enable participants to gain exposure to 4 major assets: US Equity, Foreign Equity, REITs, Fixed Income.

    As of Dec 3, 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 (83%) 
    Fund Quality -- Rated as average (64%) 
    Portfolio Building -- Rated as above average (75%) 
    Overall Rating: above average (74%)

     

    Asset Class

    Vanguard Schwab

    Fidelity

    US

    8 35

    13

    International

    1 5

    5

    Sector

    0 3

    12

    Balanced

    1 2

    8

    Fixed income

    4 9

    7

    Emerging Markets

    0 1

    3

    Real estate

    1 1

    1

    Target Date

    0 0

    7


    Compared to Schwab and Fidelity, the number of fund choices are significantly fewer leading to greater stress on the fund quality. This has a lower rating than the other two and so we would expect the returns to be lower.

    We also note that the Vanguard annuity has additional restrictions. They limit the trading on any one fund to two sell-buy trips in a year. With the smaller number of funds, this could be a significant restriction.

    The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies ( SAA andTAA , 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 Dec 3, 2010)

    Performance table (as of Dec 3, 2010)


    The annuity performs well against our benchmark -- indicating a good choice of funds

    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

    Style Fidelity ETF

    LARGE BLEND

     VDEQX  VLISX  VTSMX 

     VTI

    LARGE GROWTH

     VHCAX  VIGAX  

     VUG

    LARGE VALUE

    VEIPX

     VTV

    MID-CAP BLEND

    VIMSX

     VO


    The US funds choice is very wide. There are probably too many choices in this category and it would be better to have more choices in other asset classes.

    We will not mirror all the choices with the ETF clone just one ETF in each style category.

    International Funds

    Style Fidelity ETF

    Foreign Large Growth

    VGTSX

     EFA


    It would have been better to have some mid or small cap alternatives but still a good amount of choice.

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


    Real Estate

    Styles Fidelity ETF

    REAL ESTATE

     VGSIX

    IYR, RWX


    Real estate is under represented -- an international REIT would strengthen this asset class.

    We add an international REIT Fund to the ETF's.

    Fixed Income

    Style Fidelity ETF

    High Yield Bond

     VWEAX

     HYG

    Intermediate-Term Bond

    VBMFX

     BND

    Cash

     CASH

    CASH

    Short-Term Bond

     VFSTX

     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 add an emerging markets bond to offset this.

     We now compare the returns of the two plans using tactical and asset allocation strategies with a moderate risk portfolio.

     

     
    Strategic Asset Allocation 1Yr
    AR
    1Yr Sharpe 3Yr
    AR
    3Yr Sharpe 5Yr
    AR
    5Yr Sharpe
    Strategic Asset Allocation Growth Customize 14% 96% 1% 1% 6% 22%
    Strategic Asset Allocation Moderate Customize 12% 105% 1% 6% 5% 26%
    Strategic Asset Allocation Conservative Customize 9% 119% 2% 16% 5% 35%

    Tactical Asset Allocation 1Yr
    AR
    1Yr Sharpe 3Yr
    AR
    3Yr Sharpe 5Yr
    AR
    5Yr Sharpe
    Tactical Asset Allocation Growth Customize 10% 64% 6% 44% 10% 70%
    Tactical Asset Allocation Moderate Customize 8% 64% 5% 48% 8% 75%
    Tactical Asset Allocation Conservative Customize 6% 81% 4% 61% 7% 86%
     

     

    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. 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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  • 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 Funds

    Style 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 
    IPVIX 

     IJJ

    SMALL BLEND

    KDSAX
    SMEIX

     VB

    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 Funds

    Style 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 markets

    Style Fidelity ETF

    Emerging Markets

     LZEMX

     EEM

     

       


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

    Real Estate

    Styles 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 Income

    Style 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)



    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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  • Top Tier ETF Broker Playoffs II

    10/26/2010

    ETF’s continue to broaden their appeal both in terms of flexibility and low cost. With commission free ETF’s, more money stays in the investors pocket rather than disappearing in fees. We have completed the first analysis of TD Ameritrade and Schwab, we now proceed to examine Vanguard and Fidelity – two long term ETF providers.
     
    Vanguard is one of the largest index fund and ETF providers offering commission-free trading to its brokerage clients that use its lineups of 62 proprietary ETFs. Commission free ETF's are also offered by Fidelity and Schwab but Vanguard has the highest number of proprietary funds available.

    These funds enable participants to gain exposure to 5 major assets: Us Equity , Foreign Equity , Emerging Market Equity , Reits , Fixed Income .

    The list of minor asset classes covered:
    Communications: IXP , PTE , DGG , LTL 
    Consumer Discretionary: RXI , VCR 
    Consumer Staples: KXI , VDC , PSL , DPN , RHS 
    Diversified Emerging Mkts: EEM , GMM , PXH , DEM , SCHE 
    Diversified Pacific/asia: EPP , VPL , GMF , PAF 
    Equity Energy: ITE , IXC , IPW , DBE , RYE , DKA 
    Europe Stock: IEV , VGK , PEF , DEB 
    Financial: IYF , VFH , IPF , PFI , DRF , RYF 
    Foreign Large Blend: EFA , VEU , GWL , PFA 
    Foreign Small/mid Growth: IFSM , VSS , SCHC 
    Health: IYH , IXJ , VHT , XBI , PBE , DBR , RYH 
    High Yield Bond: HYG , JNK , PHB 
    Industrials: IYJ , EXI , VIS 
    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 
    Long Government: TLT , TLH , IEF , EDV , VGLT , TLO , PLW 
    Long-term Bond: CLY , LQD , BLV , VCLT 
    Mid-cap Blend: IJH , IWR , JKG , VO , MDY , EMM , PJG , DON , EZM , MVV 
    Mid-cap Growth: IJK , IWP , VOT , EMG , PWJ , RFG , UKW 
    Mid-cap Value: IJJ , IWS , JKI , VOE , EMV , PWP , RFV , UVU 
    Natural Resources: IYM , IGE , VAW , XLB , XME , PYZ , DBN , RTM , UYM 
    Real Estate: IYR , ICF , VNQ 
    Short Government: SHY , SHV , VGSH , PLK , USY 
    Short-term Bond: CSJ , BSV , VCSH 
    Small Blend: IJR , IWM , JKJ , VB , DSC , PJM , DES , SAA , UWM , SCHA
    Small Growth: IJT , IWO , JKK , VBK , DSG , PWT , RZG , UKK 
    Small Value: IJS , IWN , JKL , VBR , DSV , PWY , RZV , UVT 
    Technology: MTK , PTF , DBT , RYT , ROM 
    Utilities: GII , PUI , DBU , RYU , UPW 
    World Stock: IOO , VT

    As of Oct 22, 2010, this plan investment choice is rated as 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 (57%) 
    Fund Quality -- Rated as average (60%) 
    Portfolio Building -- Rated as average (39%) 
    Overall Rating: average (50%)

    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 5 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 ) 
    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)

    Portfolio Name
    1Yr AR
    1Yr Sharpe
    3Yr AR
    3Yr Sharpe
    5Yr AR
    5Yr Sharpe
    13%
    83%
    6%
    35%
    13%
    81%
    15%
    116%
    2%
    6%
    8%
    42%
    11%
    72%
    7%
    54%
    15%
    105%
    14%
    103%
    3%
    13%
    9%
    41%


    Currently, asset classes in Emerging Market Equity( EEM , VWO ) , Reits( IYR , VNQ , ICF ) and Fixed Income( AGG , BND ) are doing relatively well. These asset classes are available to Vanguard 62 participants.

     
    Fidelity now makes trading 25 iShares ETFs for free. These ETFs cover complete US equity sizes and styles (large/mid/small caps and growth/blend/value styles). It covers international equity markets well too. In additon, it has good fixed income ETFs. The missing major asset classes are REITs and commodities. We hope those will be made free too. A plan called Fidelity Commission Efficient ETFs extends this plan by including several addtional ETFs (which cost $7.95 flat commission per trade).
    Fidelity 25 Commission Free ETFs's 401K plan consists of 25 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 
    Emerging Markets Bond: PCY 
    Foreign Large Blend: EFA , VEU , GWL , PFA 
    Foreign Small/mid Value: SCZ 
    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 
    Large Value: IVE , IWW , JKF , VTV , ELV , PWV , RPV , SCHV 
    Long-term Bond: CLY , LQD , BLV , VCLT 
    Mid-cap Blend: IJH , IWR , JKG , VO , MDY , EMM , PJG , DON , EZM , MVV 
    Mid-cap Growth: IJK , IWP , VOT , EMG , PWJ , RFG , UKW 
    Mid-cap Value: IJJ , IWS , JKI , VOE , EMV , PWP , RFV , UVU 
    Muni National Long: MUB , TFI , PZA , MLN 
    Small Blend: IJR , IWM , JKJ , VB , DSC , PJM , DES , SAA , UWM , SCHA
    Small Growth: IJT , IWO , JKK , VBK , DSG , PWT , RZG , UKK 
    Small Value: IJS , IWN , JKL , VBR , DSV , PWY , RZV , UVT 
    World Stock: IOO , VT

    As of Oct 22, 2010, this plan investment choice is rated as 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 (63%) 
    Fund Quality -- Rated as poor (9%) 
    Portfolio Building -- Rated as below average (14%) 
    Overall Rating: below average (27%)

    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 BND ) 

    Performance chart (as of Oct 22, 2010)
     

    Performance table (as of Oct 22, 2010)

    Portfolio Name
    1Yr AR
    1Yr Sharpe
    3Yr AR
    3Yr Sharpe
    5Yr AR
    5Yr Sharpe
    3%
    24%
    3%
    19%
    11%
    71%
    10%
    68%
    -0%
    -3%
    7%
    28%
    2%
    14%
    6%
    47%
    14%
    90%
    10%
    75%
    2%
    5%
    8%
    37%


    Currently, asset classes in Foreign Equity( EFA , VEU ) , Emerging Market Equity( EEM , VWO ) and Fixed Income( AGG , BND ) are doing relatively well. These asset classes are available to Fidelity 25 Commission Free ETFs participants.

    To summarize:
    • Vanguard 62 Commission Free ETFs plan participants have seen returns in the 8-13% range for a moderate portfolio with strategic and tactical asset allocation based on having a five asset class portfolio.
    • Fidelity 25 Commission Free ETFs plan participants have seen returns in the 7-11% range for a moderate portfolio with strategic and tactical asset allocation based on having a five asset class portfolio.
    Given the greater number and greater diversification, the Vanguard plan would be the one most likely to continue to deliver better risk adjusted returns and so is declared the winner and moves on to the final round

    labels:investment,

    Symbols:AGG,BIV,BLV,BND,BSV,CIU,CLY,CSJ,DBE,DBN,DBR,DBT,DBU,DEB,DEM,DES,DGG,DKA,DLN,DON,DPN,DRF,DSC,DSG,DSV,EDV,EEM,EFA,ELG,ELV,EMG,EMM,EMV,EPP,EXI,EZM,GII,GMF,GMM,GWL,HYG,ICF,IEF,IEI,IEV,IFSM,IGE,IJH,IJJ,IJK,IJR,IJS,IJT,IOO,IPF,IPW,ITE,IVE,IVV,IVW,IWM,IWN,IWO,IW,


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  • Professor Siegel`s Lazy WisdomTree ETFs Portfolio Report On 06/08/2011

    06/08/2011

    Paul Farrell at MarketWatch.com first proposed this portfolio in 2007. This portfolio uses all WisdomTree's fundamental weighted ETFs. Jeremy Siegel, a Yale Professor, is instrumental in constructing these ETFs. The following is the list of funds:

    - 20% in DEFA Index (DWM)
    - 15% in Total Dividend Index (DTD)
    - 15% in Earnings Index (EXT)
    - 10% in High-Yield Equity Index (DHS)
    - 10% in DEFA High-Yield Equity Index (DTH)
    - 10% in International Energy Sector (DKA)
    - 10% in International Consumer Non-Cyclical Index (DPN)
    - 10% in Low P/E Index (EZY)

    You can also find more information on Kirk's Report here.

    These funds cover 2 major assets: US Equity, Foreign Equity.

    The follow table compares the performance of the original portfolio (it is rebalanced annually) with those of strategic and tactical asset allocation portfolios with risk profile 0 (i.e. all equities). It is clear that the tactical asset allocation portfolio outperformed both the original and the strategic asset allocation.

    Portfolio Name Strategy 1Yr AR 3Yr AR 5Yr AR
    Strategic Asset Allocation 28% -2% 2%
    Tactical Asset Allocation 4% 2% 5%
    STATIC 13% -2%

    What is more interesting is that the original portfolio underperformed S&P 500 (SPY) (VFINX). The following table shows the comparison:

    Annualized Return

    Name

    Last 1 Year

    Last 3 Years

    Last 5 Years

    Professor Siegel`s Lazy WisdomTree ETFs Original Portfolio 13% -1%
    VFINX (Vanguard (S&P 500) Index) 20% 0% 2%
    VBINX (Vanguard Balance (60% stocks/40% bonds) 15% 4% 5%


    The first week of June has shown the continuously weakened stock markets reacted to a stream of bad economic news: the 9.1% unemployment rate, the disappointing ISM manufacturing survey and the double dip housing prices. Major risk asset prices were divergent, with U.S. stocks showing the major weakness. Fixed income markets continued to be strong.

    • Among risk assets, commodities (DBC) (GLD) and international and U.S. REITs (RWX) (IYR) are still ranked at the top. 
    • Emerging market and developed market stocks (VWO) (EFA) actually edged out some gain. 
    • International treasury bond (BWX) is now ranked higher than both international and U.S. stocks now. 

    Fundamentally, we believe major problems that caused the financial crisis have not been fixed. We are in a long period of re-adjustment. For a long term or retirement investor, it is thus important to adjust portfolios accordingly.

    To summarize, the WisdomTree ETFs portfolio proposed by Professor Siegel is not performing well. Investors should keep watchful eyes on some of those so called lazy portfolios and do their own due diligence.

    Symbols: DWM, DTD, EXT, DHS, DTH, DKA, DPN, EZY, VTI, VEU, BND, SPY

    Exchange Tickers: (DWM), (DTD), (EXT), (DHS), (DTH), (DKA), (DPN), (EZY), (VTI), (VEU), (BND)

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