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Vanguard ETF: 7.4%*
Diversified Core: 8.1%*
Six Core Asset ETFs: 7.3%*
*:5 Yr Annualized Return of TAA Moderate Portfolio

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Articles on ETFs

  • 3 Lessons from the Demise of Legg Mason's Bill Miller

    11/17/2011

    Bill Miller to Step Down From Legg Mason Value Trust, reported by AdvisorOne.com. Since the great financial crisis in 2008, there have been numerous high profile managers' failures including Fairholme's Bruce Berkowitz (FAIRX). While we can put blame on these individuals, what one should always remember is that all humans are subject to failures, regardless how great they are. By the way, this is also applicable to ourselves and various great committees (recently, Morningstar started to release its new 'forward looking' rating system that is decided by committees, we'll have more on this later). So what to do with our retirement investments such as 401K, IRA accounts? How do we escape from being trapped in such funds? 3 lessons can be drawn from this:

    • Diversification: you need diversification at your overall account level, at your portfolio level and at your security level. Diversified funds are better than individual stocks, especially if you are only dealing with a handful of them. At the portfolio or account level, proper asset allocation determines majority of your returns and risk.
    • Fundamentals: yes, we still believe fundamentals such as managers' track record, investment strategies, fund expenses, etc. These will serve you the first line of defense (and offense). So information provided by firms such as Morningstar.com is still useful.
    • Technical or stop loss: on the other hand, we do believe that one need to have a ultimate line of defense: when a fund is not doing well for an extended period based on a systematic and well defined set of rules, you have to liquidate it. The permanent capital loss is just too great to hope for a recovery or rely on superhuman acts.
    The last point is the most contentious and sometimes is against our super human or well educated committee members' consensus. Recognizing that adopting this will result in under performance in a super bull market or for an (extended) period of under performance of a good fund. But that is again an insurance one has to pay to avoid severe damages by such super humans.

    Just as a comparison, the David Swensen Six ETF Asset Individual Investor Plan consists of only six broad base ETFs and diversified asset allocation portfolios have outperformed both S&P index and other once great funds by big margins:

    Portfolio Performance Comparison (as of 11/16/2011)

    Portfolio/Fund Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
    David Swensen Six ETF Asset Individual Investor Plan Tactical Asset Allocation Moderate 12% 72% 11% 82% 10% 68%
    David Swensen Six ETF Asset Individual Investor Plan Strategic Asset Allocation Moderate 5% 26% 18% 90% 6% 27%
    FAIRX -22% -74% 10% 36% 0% -3%
    SPY 6% 4% 15% 23% -1% -9%
    LMVTX -1% -6% 15% 48% -10% -34%

     

    More detailed comparison.

    Disclaimer: 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: SPX, COMP, ETFs, Headline, Mutual-Funds Tags: EEM, EFA, FAIRX, IYR, LMVTX, SPY, TIP, TLT, VWO

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  • 5 Assets for a Global Banking Crisis?

    08/17/2011

    "Don’t interpret last week’s volatility as merely a reaction to S&P’s downgrade of US Treasury debt, according to Doubleline founder and chief investment officer Jeffrey Gundlach.  Investors are actually fearful of a global banking crisis, he said, because many countries face a perilous choice – defaulting on their sovereign debt or inflating their way out of trouble." Reported in the following article

    Gundlach - 'The Cusp of a Global Banking Panic' advisorperspectives.com

     

    So if there is another Lehman like default from Euro zone, what are the similar and different positions one can take in a retirement investing portfolio such as in their 401k or IRA accounts?

    Similar to 2008 Lehman crisis, the following asset will do well:
    • Treasury bonds (TLT) (IEF): it is no different this time,  even after S&P's downgrade of the U.S. debt rating, the U.S. treasuries remain the world's most liquid safe haven. 
    Unlike 2008, the following assets will be resilient
    • Gold (GLD): with the U.S. dollar's rapid devaluation as well as stimulus policies adopted by governments around the world, gold remains the only one asset that people can trust as a hard currency.
    • Other commodities (DBC): though its underlying fundamental is not as strong as gold, commodities will be a good hedge for both sides: if the crisis does not happen, the demand of commodities from emerging markets and other economies will be strong. If the crisis does happen, the U.S. policy to devalue the dollar through more stimulus or other tools will still make commodities relatively strong relative to U.S. dollars. 
    • U.S. total bonds (AGG) (BND): in general, US coporate balance sheets are exceptionally strong and coupled with government treasury bonds' strength, this asset class will withstand the crisis better this time. 
    In case the European governments manage to kick the can further down the road this time, U.S. Real Estate Investment Trusts (REITs) (IYR) (VNQ) could be a good asset class to invest this time: it enables one's portfolio to have risk asset exposure. Taking advantage of exceptionally low interest rates, these REIT companies have much better balance sheets and enjoy relatively cash flow. If the crisis does happen, REITs will not suffer as badly as this time (considering their valuation  and fundamentals) and they are thus a good defensive asset to hedge. However, we should caution that in a severe fallout, REITs, like stocks, can be subject to big loss.

    Check out MyPlanIQ Diversified Core Allocation ETF Plan and Six Core Asset ETFs. See how the portoflios are compared with other tactical asset allocation ETFs or mutual funds in our latest newsletter or through this comparison link.


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  • Technology Companies Outshine Among Large Cap Growth Stocks

    07/19/2011

    Large technology companies such as those in Nasdaq 100 (QQQ) (COMP) have been doing exceptionally well in the past five years. They out performed large cap growth stocks. The following table shows the performance of large growth stock ETFs:

    As of 7/15/2011

    07/15/2011

    Description Symbol 1 Yr 3 Yr 5 Yr Avg. Volume(K) 1 Yr Sharpe
    PowerShares QQQ QQQ 27.88% 10.04% 10.54% 52,975 177.47%
    Vanguard Growth ETF VUG 26.77% 5.52% 5.66% 373 200.76%
    iShares Russell 1000 Growth Index IWF 27.2% 5.95% 5.56% 2,268 204.37%
    iShares S&P 500 Growth Index IVW 25.99% 5.69% 4.89% 562 205.62%

    For information on more ETF performance, please refer to here. For various stock styles (such as large growth, mid cap, small value etc.), please refer to MyPlanIQ's stock style table.

    Nasdaq 100 (QQQ) was the front runner in last 1, 3 and 5 year periods. These technology companies sidestepped the last financial crisis with pristine balance sheets and conservative growth plans, having learned a lesson from the technology bubble in 2001-2002. What is more interesting is that large U.S. technology companies have dramtically expanded their global reach and are now considered multi-national companies. In the past decade, they outsourced some of their development to emerging markets, gradually learned and developed local markets and now are in the perfect position to reap what they have sowed in these rapidly developing economies.

    For example, Apple (AAPL) just released its latest quarter earnings report that stated its Chinese sales reached $3.8 billion, up almost sixfold from a year earlier. The company plans to open 30 stores in the September period, including in Hong Kong, broadening a retail chain that generated $3.5 billion in sales last quarter.

    The following are the top holdings of QQQ, as of 7/18/2011

    Name Symbol Weights (%)
    Apple (AAPL) 13.35%
    Microsoft (MSFT) 8.66%
    Oracle (ORCL) 6.16%
    Google (GOOG) 5.82%
    Intel (INTC) 4.56%
    Amazon (AMZN) 3.69%
    Qualcomm (QCOM) 3.57%
    Cisco (CSCO) 3.28%
    Amgen (AMGN) 1.96%
    Comcast (CMCSA) 1.93%

    In general, U.S. large growth companies are positioned well for the economic recovery. For a retirement portfolio, proper exposure into these high quality multi-national companies can be beneficial.

    Symbols: COMP, QQQQ, AAPL, ORCL, MSFT, GOOG, INTC, CSCO, AMZN, QCOM, AMGN, CMSCA, ETFs

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  • WisdomTree Emerging Market Small Cap ETF Enables Diversification

    06/16/2011

    Emerging market stocks have been recognized as an important asset class for diversification purpose for a long term retirement investing portfolio. Small company stocks in emerging economies offer even higher growth in this asset class. The small cap shares are usually those which have relatively small market capitalization usually ranging between $ 300 million to $ 2 billion.


    It is thus important to study these ETFs more carefully before investing.  In this article, we present more detailed study on WisdomTree Emerging Market ETF (DGS).

    The following table lists three most liquid small cap ETFs in this asset class. 

    Emerging Market Small Cap

    06/10/2011

    Description Symbol 1 Yr 3 Yr 5 Yr Avg. Volume(K) 1 Yr Sharpe
    SPDR S&P Emerging Markets Small EWX 18.27% 3.74% NA 119 104.22%
    Wisdomtree Emerging Mkts Small DGS 33.94% 11.31% NA 129 166.6%
    Guggenheim Frontier Markets FRN 19.43% NA NA 72 108.31%


    For information on more ETF performance, please refer to here

    From the above table clearly DGS is leading the other in terms of longevity and in terms of returns of one year. Compared with broad base emerging market index ETF (DGS), its three year annualized return 11.31% is way above the EEM's annualized return (about 0%). The inception date of the fund is 8/1/2007. 64% of the fund iin small cap shares.

    DGS has also a unique diversification in the emerging market. Please see the following table for its holding percentages among countries as of 6/06/2011.

    1. Taiwan

    20.97%

    2. South Korea

    11.24%

    3. South Africa

    9.65%

    4. Thailand

    9.61%

    5. Brazil

    8.95%

    6. Israel

    7.21%

    7. Turkey

    6.88%

    8. Malaysia

    5.31%

    9. China

    5.00%

    10. Chile

    4.17%

    11. Philippines

    3.18%

    12. Indonesia

    2.34%

    13. Mexico

    2.25%

    14. India

    1.25%

    15. Poland

    0.52%

    16. Argentina

    0.33%

    17. United States

    0.15%

    Please also find below the sector wise diversification of DGS as on 06-06-2011.

    Sector

    Weight

    1. Industrials

    21.40%

    2. Financials

    18.47%

    3. Consumer Discretionary

    16.38%

    4. Information Technology

    11.54%

    5. Materials

    10.19%

    6. Consumer Staples

    7.71%

    7. Utilities

    6.67%

    8. Health Care

    2.95%

    9. Energy

    2.38%

    10. Other

    2.08%

     

    One of the biggest advantages of investing in small-cap stocks is to exploit market inefficiency: the opportunity to beat institutional investors.Many small cap companies are not well researched. This is more true for emerging market small companies. Since DGS offers a systematic way to invest in a broad basket of small compaines in these regions, it is an effective to gain exposure in this important asset class and derive higher returns.

    Disclaimer: 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, DGS, FRN, EWX, VWO, ETFs, Asset Allocation

    Exchange Tickers: (EEM), (DGS), (FRN), (EWX), (VWO)

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  • TD Ameritrade Commission Free ETFs: Comprehensive Portfolio Building Blocks

    10/19/2010

    TD Ameritrade (Ticker: AMTD) just announced that it offers 100+ commission free ETFs for its clients.The 100+ (a precise number is 101) ETFs were selected by Morningstar that include ETFs from iShares, Vanguard, State Street, PowerShares, and others. In comparison, Schwab's free ETFs include only 11 of its own funds. Similarly, Vanguard offers 47 Vanguard ETFs for free. Fidelity was the first one that offers 25 iShares ETFs for free. See the official TD Ameritrade offering for more details.

    MyPlanIQ views this is a very significant step for small investors (well we are not sure whether TD Ameritrade would still offer such a deal to very large accounts). We have constructed an investment plan TD Ameritrade Commission Free ETFs to take advantage of these ETFs. Though for the trades of these ETFs to be eligible for commission free, TD Ameritrade's customers have to hold these ETFs for more than 30 days, such a restriction is not significant for our plan since the plan only rebalances at most once per month. In this plan, the minimum holding period for each fund is set to be 1 month, which is equivalent to 30 days.

    TD Ameritrade Commission Free ETFs's 401K plan consists of 101 funds. These funds enable participants to gain exposure to 6 major assets: Emerging Market Equity , Foreign Equity , Fixed Income , US Equity , Commodity , REITs . We view this is the most comprehensive coverage of major asset classes. 

    The list of minor asset classes covered are: 

    COMMODITIES BROAD BASKET: GSG , DBC 
    Conservative Allocation: AOK 
    DIVERSIFIED EMERGING MKTS: EEM , GMM , PXH , DEM , SCHE 
    Emerging Markets Bond: PCY 
    EQUITY: VTI,VT 
    EUROPE STOCK: IEV , VGK , PEF , DEB 
    Foreign Large Blend: EFA , VEU , GWL , PFA 
    Foreign Large Growth: EFG 
    Foreign Large Value: EFV , PID , DWM 
    FOREIGN SMALL/MID GROWTH: IFSM , VSS , SCHC 
    Foreign Small/Mid Value: SCZ 
    Global Real Estate: IFGL , RWX 
    High Yield Bond: HYG , JNK , PHB 
    Inflation-Protected Bond: TIP 
    Intermediate Government: IEI , VGIT , ITE 
    Intermediate-Term Bond: AGG,CIU , BIV,BND 
    JAPAN STOCK: EWJ , JPP , PJO , DXJ 
    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 
    Latin America Stock: ILF , GML 
    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 
    Moderate Allocation: AOM 
    Multisector Bond: AGG,GBF , BND , LAG 
    Muni National Interm: ITM 
    Muni National Long: MUB , TFI , PZA , MLN 
    Muni National Short: SUB , SHM , PVI , SMB 
    PACIFIC/ASIA EX-JAPAN STK: EPP,AAXJ , GMF , PAF , DND 
    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 
    SPECIALTY-REAL ESTATE: RWR , PSR , URE 
    World Allocation: AOR , AOA 
    WORLD BOND: IGOV , BWX,WIP 
    WORLD STOCK: IOO , VT

    As of Oct 15, 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 great (97%) 
    Fund Quality -- Rated as below average (29%) 
    Portfolio Building -- Rated as great (90%) 
    Overall Rating: above average (74%)

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

    REITs:( IYR or VNQ or ICF ) 
    Fixed Income:( AGG or BND ) 
    Commodity:(DBC) 
    Foreign Equity:( EFA or VEU ) 
    Emerging Market Equity:( EEM or VWO ) 
    US Equity:( SPY or VTI ) 
    Performance chart (as of Oct 15, 2010)

    Performance table (as of Oct 15, 2010)

    Portfolio Name1Yr AR1Yr Sharpe3Yr AR3Yr Sharpe5Yr AR5Yr Sharpe
    TD Ameritrade Commission Free ETFs Tactical Asset Allocation Moderate 13% 87% 13% 86% 20% 128%
    TD Ameritrade Commission Free ETFs Strategic Asset Allocation Moderate 10% 85% -1% -6% 9% 47%
    Six Core Asset ETFs Tactical Asset Allocation Moderate 10% 65% 9% 66% 17% 114%
    Six Core Asset ETFs Strategic Asset Allocation Moderate 11% 84% 2% 9% 9% 42%

     

    To summarize, TD Ameritrade Commission Free ETFs plan is very comprehensive and allows investors to achieve significant performance with reasonable risk. With now all of the top discount brokers (Fidelity, Schwab and TD Ameritrade) offering such commission free ETFs, investors are now free from trading cost and focus on portfolio building in terms of better asset allocation strategies. 

    labels:investment,

    Symbols:SUB,SHM,PVI,SMB,EPP,AAXJ,GMF,PAF,DND,SHY,SHV,VGSH,PLK,USY,CSJ,BSV,VCSH,AOR,AOA,IGOV,BWX,WIP,IOO,VT,RWR,PSR,URE,IJS,IWN,JKL,VBR,DSV,PWY,RZV,UVT,IJT,IWO,JKK,VBK,DSG,PWT,RZG,UKK,IJR,IWM,JKJ,VB,DSC,PJM,DES,SAA,UWM,SCHA,ITM,MUB,TFI,PZA,MLN,AGG,GBF,BND,LAG,IJJ,ETFs,Portfolio,Building,Asset,Allocation,Commission,Free,

     

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  • Top Tier ETF Providers Playoffs II

    10/19/2010

  • Top Tier ETF Provider Playoffs

    10/19/2010

  • TD Ameritrade Commission Free ETF’s Empowers Both Strategic and Tactical Asset Allocation

    10/19/2010

  • Apple 401K: A Great Company with an Average Retirement Plan

    10/19/2010

  • Core Satellite – A Way to Step Into Tactical Asset Allocation

    10/19/2010

  • Core Satellite – A Way to Step Into Tactical Asset Allocation

    10/19/2010

  • Core Satellite – A Way to Step Into Tactical Asset Allocation

    10/19/2010

  • Lazy Portfolios -- The Playoffs II

    10/19/2010

  • Lazy Portfolios -- The Playoffs II

    10/19/2010

  • Lazy Portfolios -- The Playoffs II

    10/19/2010

  • Lazy Portfolios -- The Playoffs II

    10/19/2010

  • Lazy Portfolios -- The Playoffs

    10/19/2010

  • Lazy Portfolios -- The Playoffs

    10/19/2010

  • Lazy Portfolios -- The Playoffs

    10/19/2010

  • Lazy Portfolios -- The Playoffs

    10/19/2010

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