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Articles on MBB

  • Using Asset Classes in Amerivest Guided Portfolios to Construct ETF Portfolios

    07/22/2011

    We have just released ETF based plan Amerivest Guided Portfolios Based ETF Plan that uses index ETFs to represent the asset classes suggested by the Amerivest balanced portfolio. Based on Amerivest, the model portfolios are suggested by Morningstars.

    One can see the list of ETFs used in this plan from the Investment Options of the plan.

    This plan investment choice is rated as average based on our plan rating methodology that measures the effectiveness of a plan's available investment funds. It has the following detailed ratings:

    Diversification -- Rated as great (94%)
    Fund Quality -- Rated as below average (26%)
    Portfolio Building -- Rated as below average (23%)
    Overall Rating -- Average (45%)

    The performance has been reasonable.

    Portfolio Performance Comparison

    Portfolio/Fund Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
    VFINX 23% 151% 3% 15% 3% 8%
    Amerivest Guided Portfolios Based ETF Plan Strategic Asset Allocation Moderate 19% 181% 3% 17% 6% 34%
    Amerivest Guided Portfolios Based ETF Plan Tactical Asset Allocation Moderate 14% 125% 7% 44% 11% 76%
    VBINX 16% 203% 6% 32% 5% 28%

    Both SAA and TAA portfolios beat the general S&P 500 (SPX) (VFINX) and the balanced portfolio index (VBINX) in the last 5 years.

    See more detailed comparison from our comparison tool here. Users can change the parameters on that page to compare with other portfolios or funds.

    See the SeekingAlpha article for some detailed description on this plan.

    In general, this is a good plan that has very good diversification. Users can do more comparison and studies on this.

    Symbols: BIV, SPX, BLV, BND, BSV, BWX, DBC, EMB, GWX, IWC, JNK, MBB, TIP, VBK, VBR, VEU, VNQ, VOE, VOT, VTI, VTV, VUG, VWO, Brokerage Plans

     

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  • Appetite for US High Yield Bonds Remains High as Yields Tighten

    05/11/2011

     


    High yield bond ETFs concentrate on lower quality corporate bonds, which are considered riskier than higher-quality or more established companies. Because of this higher level of risk, high-yield bonds, also known as junk bonds, offer higher yields to investors. US high yield bond ETFs invest at least 65% of capital in binds that are not rated or are rated by S&P or Moody's at or below BB (considered speculative). Because of high returns and the potential for diversification across many markets, regions, and industries, high yield bonds are a major part of many investment strategies.

    We track asset class movement and you can see here the fixed income table which is updated weekly.

    Assets Class Symbols 05/06
    Trend
    Score
    04/29
    Trend
    Score
    Direction
    International Inflation Protected WIP 6.74% 9.22% v
    High Yield JNK 5.54% 5.68% v
    International Treasury BWX 5.1% 6.82% v
    Long Term Credit LQD 3.48% 2.87% ^
    Emerging Mkt Bonds PCY 3.48% 2.21% ^
    20+ Year Treasury TLT 3.38% 1.63% ^
    Inflation Protected TIP 3.09% 3.27% v
    10-20Year Treasury TLH 2.88% 1.73% ^
    Intermediate Term Credit CIU 2.43% 2.06% ^
    Intermediate Treasury IEF 2.39% 1.65% ^
    US Total Bond BND 2.1% 1.77% ^
    MBS Bond MBB 1.92% 1.83% ^
    California Muni CMF 1.74% 1.99% v
    National Muni MUB 1.57% 1.24% ^
    Short Term Credit CSJ 1.0% 1.09% v
    New York Muni NYF 0.64% 0.51% ^
    Short Term Treasury SHY 0.55% 0.53% ^
    Treasury Bills SHV 0.08% 0.07% ^
      Trend score is the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).
    You can get a no cost widget for any of these tables which will automatically update weekly.


    At the end of last week (5/6/2011), high yield bond ETFs, represented by the SPDR Barclays Capital High Yield (JNK), stood among the top of the Fixed Income Return Table. Yields in the sector have declined as risk premiums have tightend on stronger performance by companies with lower credit ratings. While returns on corporate bonds have declined slightly in recent periods, ETFs that track the market have continually offered strong returns relative to other fixed income securities.

    U.S. High Yield Bonds

    05/06/2011
    Description Symbol 1 Yr 3 Yr 5 Yr Avg. Volume(K) 1 Yr Sharpe
    iShares iBoxx $ High Yield Corp HYG 17.67% 7.03% NA 1,247 270.24%
    SPDR Barclays Capital High Yield JNK 20.83% 8.41% NA 2,972 279.79%
    PowerShares Fundamental High Yield PHB 19.2% 0.79% NA 302 318.25%


    Among US High Yield Bond ETFs, the top performers include the SPDR Barclays Capital High Yield (JNK), the Powershares Fundamental High Yield ETF (PHB), and the iShares iBoxx $ High Yield Corporate ETF (HYG) returning 20.83%, 19.20%, 17.67% respectively in the past year.

    With the highest one-year return and the highest trading volume, the SPDR Barclays Capital High Yield ETF remains a srtong investment option. The ETF is well diversified, with no single bond comprising more than 4% of total assets and the top 10% of assets making up only 22.58% of the total.

    Going forward, yields on high yield corporate debt should continue to tighten as long as companies continue to generate strong performance. Still, high yield corporate bond ETFs should continue to offer attractive returns relative to other fixed income assets.

    Corporate bonds are an important component of diversified bond portfolios, as they offer greater returns and risks than government bonds. Due to their high level of interest paid, generally in the form of monthly distributions, corporate bond ETFs may be especially suitable for individuals approaching or already in retirement. As with any investment, it is important to make sure the risk and return levels match up with your personal investment goals.


    Symbols: AGG, BND, SHV, SHY, IEF, TLH, TLT, TIP, WIP, HYG, JNK, PHB, CSJ, CIU, LQD, BWX, CMF, NYF, MUB, MBB, PCY, EMB


    Tickers: (NYSE: AGG), (NYSE: BND), (NYSE: SHV), (NYSE: SHY), (NYSE: IEF), (NYSE: TLH), (NYSE: TLT), (NYSE: TIP), (NYSE: WIP), (NYSE: HYG), (NYSE: JNK), (NYSE: PHB), (NYSE: CSJ), (NYSE: CIU), (NYSE: LQD), (NYSE: BWX), (NYSE: CMF), (NYSE: NYF), (NYSE: MUB), (NYSE: MBB), (NYSE: PCY), (NYSE: EMB)

     

    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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  • JNK Beats WIP At the Top of The Fixed Income Table

    05/10/2011

     

    In order to reach your financial objectives, you must diversify. There are a range of investment alternatives that vary greatly in the degree and type of risk and potential return. The key to developing a sound portfolio is to strike the right balance between potential reward and risk, based on your financial objectives, financial situation and investment style. 


    Fixed Income refers to assets that provide their owners with a fixed stream of income. Fixed income assets can be broken down into five sub-classes:

    • Government-issued securities
    • Corporate-issued securities
    • Inflation-protected securities (IPS)
    • Mortgage-backed securities (MBS)
    • Asset-backed securities (ABS)

    An enormous amount of innovation continues within the world of fixed income. For the retail investor, IPS, MBS, and ABS are all relatively new additions. The U.S. leads the world in the range and depth of fixed-income offerings--particularly with MBS and ABS. Other countries are developing their MBS and ABS markets. 

    Although the fixed income stream ETFs provide the best hedge against equity volatility, the returns are not high as equity and other assets. WIP, JNK & BWX are the best performers in terms of returns but the last week showed a decline.

    There is a mixed trend within the fixed asset type ETFs but overall more sub-classes are up than down. We are expecting a shift in ETF’s towards international fixed income as the dollar weakens and interest rates are raised overseas

    WIP fund total Net assets value is 1.362 billion with a one year return of 16.95% and a three year return is of 4.01%. The gross expense ratio is 0.50%. The total sector allocation is broken down into the following composition: Treasury 99.83% & Cash 0.16%.

    JNK fund total Net assets value is 7.3 billion with a one year return of 12.82% and a three year return is of 8.21%. The gross expense ratio is 0.40% for the sector allocations please see the graph below:

     

     

     

    Although the one year returns of WIP i.e. 16.95% are greater than JNK i.e. 12.82%, we prefer the longevity from JNK i.e. 8.21% within the 3 years double the time of WIP return and it is performing well in the short term too.

    We track asset class movement and you can see here the fixed income table which is updated weekly.

    Assets Class

    Symbols

    05/06
    Trend
    Score

    04/29
    Trend
    Score

    Direction

    International Inflation Protected

    WIP

    6.74%

    9.22%

    v

    High Yield

    JNK

    5.54%

    5.68%

    v

    International Treasury

    BWX

    5.1%

    6.82%

    v

    Long Term Credit

    LQD

    3.48%

    2.87%

    ^

    Emerging Mkt Bonds

    PCY

    3.48%

    2.21%

    ^

    20+ Year Treasury

    TLT

    3.38%

    1.63%

    ^

    Inflation Protected

    TIP

    3.09%

    3.27%

    v

    10-20Year Treasury

    TLH

    2.88%

    1.73%

    ^

    Intermediate Term Credit

    CIU

    2.43%

    2.06%

    ^

    Intermediate Treasury

    IEF

    2.39%

    1.65%

    ^

    US Total Bond

    BND

    2.1%

    1.77%

    ^

    MBS Bond

    MBB

    1.92%

    1.83%

    ^

    California Muni

    CMF

    1.74%

    1.99%

    v

    National Muni

    MUB

    1.57%

    1.24%

    ^

    Short Term Credit

    CSJ

    1.0%

    1.09%

    v

    New York Muni

    NYF

    0.64%

    0.51%

    ^

    Short Term Treasury

    SHY

    0.55%

    0.53%

    ^

    Treasury Bills

    SHV

    0.08%

    0.07%

    ^

     Trend score is the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).
    You can get a no cost widget for any of these tables which will automatically update weekly.

     

    If you are planning to shift part of your portfolio into fixed-income investments to help manage risk, you may also want to consider "laddering" these securities. This means you spread the total dollar amount of your investment among fixed-income securities with different maturities.


    Symbols:  AGG, BND, SHV, SHY, IEF, TLH, TLT, TIP, WIP, HYG, JNK, PHB, CSJ, CIU, LQD, BWX, CMF, NYF, MUB, MBB, PCY, EMB 

     

     

    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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  • Emerging Market Bonds Become Important Parts of Many Portfolios

    05/04/2011

    Emerging market bonds have become a large part of many investors' portfolios in recent years. This can be attributed to an increase in the credit quality of the bonds of foreign countries and companies. These bonds generally offer higher yields than T reasury bonds and domestic corporate bonds. ETFs that track this market allow investors to diversify across many international regions and across countries of various size and economic strength.

    Recently, Emerging Market Bond ETFs have performed well when compared to other Fixed Income Assets. With a trend score of 2.21%, Emerging Market Bond ETFs, represented by PowerShares Emerging Markets Sovereign Debt Portfolio (PCY) have shown improvement in recent periods. This can be attributed to the continued growth and economic strengthening of many developing nations along with the desire by many investors to move money away from developed nations that have encountered economic trouble.

     

    Fixed Income Return Table

    4/29/2011

    Assets Class Symbols 04/29
    Trend
    Score
    04/21
    Trend
    Score
    Direction
    International Inflation Protected WIP 9.22% 7.53% ^
    International Treasury BWX 6.82% 4.91% ^
    High Yield JNK 5.68% 5.88% v
    Inflation Protected TIP 3.27% 2.89% ^
    Long Term Credit LQD 2.87% 2.43% ^
    Emerging Mkt Bonds PCY 2.21% 1.52% ^
    Intermediate Term Credit CIU 2.06% 1.74% ^
    California Muni CMF 1.99% 0.42% ^
    MBS Bond MBB 1.83% 1.32% ^
    US Total Bond BND 1.77% 1.39% ^
    10-20Year Treasury TLH 1.73% 1.02% ^
    Intermediate Treasury IEF 1.65% 1.06% ^
    20+ Year Treasury TLT 1.63% 1.12% ^
    National Muni MUB 1.24% 0.84% ^
    Short Term Credit CSJ 1.09% 0.89% ^
    Short Term Treasury SHY 0.53% 0.46% ^
    New York Muni NYF 0.51% 0.06% ^
    Treasury Bills SHV 0.07% 0.09% v

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

    In the past year, ETFs tracking Emerging Market Bonds have offered investors strong performance, slightly above historical levels. EMB iShares JPMorgan USD Emerging Markets ETF (EMB) lead within the sector, growing 9.3% in the past year. Over the past three years EMB has returned 7.44%. Another strong performer in Emerging Market Bond ETFs has been PCY PowerShares Emerging Markets (PCY), gaining 8.7% in the past year, slightly above its three year growth of 8.32%.

     

    Emerging Market Bonds

    4/29/2011

    Description Symbol 1 Year 3 Years
    EMB iShares JPMorgan USD Emerg Mkt EMB 9.3% 7.44%
    PCY PowerShares Emerging Mkts PCY 8.7% 8.32%

     

    As developing economies continue to improve, Emerging Market Bond ETFs will remain an important part of a well-diversified portfolio. With developed nations like the United States, Japan, and certain European countries experiencing economic instability, market participants will likely continue moving towards emerging market assets like Bond ETFs.

    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.

    Tickers: (NYSE: PCY), (NYSEArca: EMB), (NYSE: PCY), (NYSE: EMB), (NYSE: WIP), (NYSE: BWX), (NYSE: JNK), (NYSE: TIP), (NYSE:LQD), (NYSE:.PCY), (NYSE: CIU), (NYSE: CMF), (NYSE: MBB), (NYSE: BND), (NYSE: TLH), (NYSE: IEF), (NYSE: TLT), (NYSE: MUB), (NYSE: CSJ), (NYSE: SHY), (NYSE: NYF), (NYSE: SHV)

     

    Symbols: PCY, EMB, WIP, BWX, JNK, TIP, LQD, PCY, CIU, CMF, MBB, BND, TLH, IEF, TLT, MUB, CSJ, SHY, NYF, SHV 


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  • How Are Morningstar's Best Bond Fund Managers Faring in These Trying Times

    04/29/2011

    Many working people put off their retirement investing -- just one more year until it has becomes a "hair on fire" problem. The problem is that we can easily be overwhelmed and shut down. The way to solve this is to focus on what works in the long term -- that is what long term investing is all about -- and allow that to filter out what may work in the short term but won't stand the test of time.

    We continue to examine different portfolios to see what we can learn and use to further our investment portfolios.

    This article reviews the best of bond strategy that we first published in November of last year. This outlined a strategy based on bond funds only It was simple: out of the seven top bond managers (according to Morningstar) own the top performing bond fund which you review on a monthly basis (or quarterly if you prefer). Every year we review the list of top performers and you update your list of funds to maintain only the top performers in your list. We will call this Best of Bonds (BoB).

    Currently, the top seven we use are:

    Bond Fund

    Ticker

    PIMCO Total Return

    PTTRX

    TCW Total Return Bond

    TGLMX

    Western Asset Core Bond

    WATFX

    Metropolitan West Total Return Bond

    MWTRX

    Loomis Sayles Bond

    LSBDX

    Dodge & Cox Income

    DODIX

    FPA New Income

    FPNIX

    In a previous set of articles we tried to compete using bind ETFs such as BND, BWX, CIU, CMF, CSJ, IEF, JNK, LQD, MBB, MUB, NYF, PCY, SHV, SHY, TIP, TLH, TLT, WIP but we were unable match the returns of these managed bond funds. With PIMCO recently announcing a managed ETF bond fund, it will be interesting to see whether this gap will be filled.

    Bonds have had a torrid time since the turn of the year with many tactical strategies moving to cash rather than staying in bond funds. With interest rates sticking to their lows and with QEII still in operation, there has been little joy for bond owners.

    We compare this against a portfolio of dividend bearing ETF's that we have reviewed and use as a recommended plan for those looking to invest for income.

    The comparison is

     

    Portfolio Performance Comparison

    Portfolio/Fund Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
    P Bond Funds Momentum Based on Upgrading Fixed Income Managers of the Year Quarterly 5% 85% 11% 194% 10% 164%
    P Bond Funds Momentum Based on Upgrading Fixed Income Managers of the Year`s Funds Monthly 6% 110% 12% 219% 11% 172%
    Retirement Income ETFs Strategic Asset Allocation Moderate 13% 96% 4% 16% 5% 23%
    Retirement Income ETFs Tactical Asset Allocation Moderate 7% 52% 10% 76% 10% 66%


    Full details with drawdown and other parameters -- you can also add other portfolios for comparison

    Three Month Chart (Blue is Quarterly)

    One Year Chart  (Blue is Quarterly)

    Three Year Chart  (Blue is Quarterly)

    Five Year Chart  (Blue is Quarterly)


    Takeaways
    • Despite the challenging conditions, the Bond funds continue to deliver reasonable results in the short term and still look good over the longer time horizon
    • The retirement income ETF tactical asset allocation has a similar long term performance but with more trading activity
    • The strategic asset allocation has been doing well in the short term but suffered in the big downturn

    The best of bonds is still a solid approach and with the advent of managed bond ETFs, it may be possible to have an ETF equivalent plan.

    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: PTTRX, TGLMX, WATFX, MWTRX, LSBDX, DODIX, FPNIX, BND, BWX, CIU, CMF, CSJ, IEF, JNK, LQD, MBB, MUB, NYF, PCY, SHV, SHY, TIP, TLH, TLT, WIP

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  • Tactically Manage An Income Producing Portfolio With Commodity Exposure

    03/25/2011

  • Earthquakes and Wars Call for Diversification and Tactical Asset Allocation in Investing

    03/20/2011

  • 'Safe' Assets' Trends Back to Positive: Risk Aversion Began?

    03/14/2011

  • Major Assets: Risk Assets Strong While Safe Assets Have Negative Trends

    03/07/2011

  • Commodities Showed Their Hedge Amid Equity Weakness

    02/28/2011

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

    02/26/2011

  • 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

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

    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

  • 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

  • Junk Bonds: Sector to Shine on Rising Interest Rates

    01/12/2011

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