 |
Vanguard ETF: |  |
7.4%* |
|
Diversified Core: | |
8.1%* |
|
Six Core Asset ETFs: | |
7.3%* |
Articles on SCZ
- Armstrong's Informed Investor Lazy Portfolio Feels The Commodities Pain
04/18/2011
The incidents in Japan, the Middle East and even as far back as New Orleans teach us the danger of living on borrowed time, the reactors, the governments the levees keeping things going -- just one more year. The temptation to delay until next time is very seductive until disaster strikes and the cost to repair, dwarfs the cost to prevent. Many working people put off their retirement investing -- just one more year until it becomes a "hair on fire" problem -- which it now is for baby boomers for whom retirement is a near and present danger.
We continue to examine luminary portfolios to see what we can learn and use to further our investment portfolios.
Frank Armstrong, author of The Informed Investor, proposed this portfolio for an MSN Money article. The two key points of the portfolio are that it has four asset classes (US, International, REIT, Bonds) and relies on market indices rather than active management. The portfolio uses index funds because index funds eliminate manager risk. It overweights small-cap stocks as small-cap stocks have historically outperformed large caps stocks. The portfolio has a strong value tilt, based on the theory that, over the long haul, beaten-down stocks will perform better than high-flying growth stocks.
This should be a low cost, well performing portfolio.
The fund selection for testing the strategy is listed below with the ETF alternatives:
- 9.25% in Vanguard Small Cap Value VISVX (SCZ)
- 9.25% in Vanguard Value VIVAX (SPY, IYY)
- 6.25% in Vanguard Small-Cap Growth VISGX (VBK)
- 6.25% in Vanguard 500 Index VFINX (IVW)
- 31% in Vanguard Total International Stock VGTSX (EFA)
- 8% in Vanguard REIT VGSIX (IYR, VNQ, RWX)
- 30% in Vanguard Short-Term Bond VBISX (BND, AGG)
Things to note about the portfolio:
- This is designed as a lazy portfolio with limited rebalancing specified
- 31% in US equities is significant with a mix of large and small cap stocks
- With 70% in equities, this is a growth portfolio
- REIT is possibly underweighted
- There is no commodity asset class
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
Portfolio Performance Comparison
Portfolio/Fund Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Armstrong Original 10% 66% 4% 17% 5% 20% Six Core Asset ETF Benchmark Tactical Asset Allocation Moderate 10% 71% 9% 73% 13% 91% Six Core Asset ETF Benchmark Strategic Asset Allocation Moderate 13% 103% 3% 20% 7% 35% A detailed comparison can be found here
Takeaways
-
2010 was a good year for lazy portfolios and as we continue through 2011while equities are still performing well, not having a commodities option hurts returns
-
TAA has benefits in terms of being able to stay away from some area such as European equities
-
Index funds continue to show good results against managed funds
-
Larger asset class plans have the benefit of stability and good returns
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: VISVX, SCZ, VIVAX, SPY, IYY, VISGX, VBK, VFINX, IVW, VGTSX, EFA, VGSIX, IYR, VNQ, RWX, BND, AGG, DBC, VEU, ICF, EEM, VWO - Schwab Mutual Funds Beat out ETFs
04/06/2011
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Retirement investing is a "hair on fire" problem -- especially for baby boomers for whom retirement is a near and present danger. There is a real lack of consistent, unbiased information that a retiree can use to help improve risk adjusted returns. Blogger Jenny Hollingworth has been teaching herself about investing and has come to the point where she is going to choose a plan and make her first investments.
In her recent post New Steps she sorted through a list of alternatives and chose the Schwab OneSource Select List Funds.
The reason for her choice was:
- The highest possible rating for each plan is 5 stars. So I bypassed anything that didn’t have 5 (because really, why go for less?)
- Picked out a name I knew: Schwab. Specifically: Schwab OneSource Select List Funds. I selected it.
- This is an application to Charles Schwab's OneSource Select List mutual funds. These funds are No Load and No Transaction Fee (NTF) mutual funds. Based on Schwab's policy, the no load NTF funds have 90 days redemption fee period. As of 1/1/2010, there are total 140 OneSource Select List funds available from Schwab.
We are going to review the Schwab OneSource Select List Funds to see whether she chose a good plan. The plan consists of 137 funds. These funds enable participants to gain exposure to 6 major assets: US Equity, Commodity, Foreign Equity, REITs, Emerging Market Equity, Fixed Income.
Asset Class Ticker Name LARGE VALUE AAGPX American Beacon Lg Cap Value Inv Foreign Large Value AAIPX American Beacon Intl Equity Inv Retirement Income AANPX American Beacon Retire Inc & Apprec Inv High Yield Muni ABHYX American Century High-Yield Muni Inv Inflation-Protected Bond ACITX American Century Infl-Adj Bond Inv Muni National Long ACLVX American Century Long-Term Tax-Free Inv MID-CAP VALUE ACMVX American Century Mid Cap Value Inv Conservative Allocation AONIX American Century One Choice: Vry Cnsrv I MID-CAP VALUE ARDEX Aston/River Road Dividend All Cap Val N Target Date 2011-2015 ARFIX American Century LIVESTRONG 2015 Inv Retirement Income ARTOX American Century LIVESTRONG Inc Inv Target Date 2021-2025 ARWIX American Century LIVESTRONG 2025 Inv Target Date 2031-2035 ARYIX American Century LIVESTRONG 2035 Inv SMALL VALUE AVPAX American Beacon Small Cp Val Inv EUROPE STOCK AXEAX Threadneedle European Equity A Muni National Interm BMBSX Baird Intermediate Muni Bd Inv Technology BOGSX Black Oak Emerging Technology Small Growth BSCFX Baron Small Cap Moderate Allocation BUFBX Buffalo Balanced Technology BUFTX Buffalo Science & Technology DIVERSIFIED EMERGING MKTS CEMVX Causeway Emerging Markets Investor MID-CAP BLEND CHTTX Aston/Optimum Mid Cap N Intermediate Government CPTNX American Century Government Bond Inv Small Growth CSMVX Century Small Cap Select Inv REAL ESTATE CSRSX Cohen & Steers Realty Shares Long-Short CVSIX Calamos Market Neutral Income A SMALL BLEND DISSX Dreyfus Small Cap Stock Index Bank Loan EABLX Eaton Vance Floating Rate Adv Conservative Allocation EXDAX Manning & Napier Pro-Blend Cnsrv Term S Foreign Large Blend EXWAX Manning & Napier World Opportunities A Moderate Allocation FAGSX First American Strat Growth Allc A Financial FBRSX FBR Small Cap Financial ULTRASHORT BOND FEUGX Federated Adjustable Rate Secs Instl Intermediate Government FICMX Federated Income Instl Muni National Interm FIMTX Federated Intermediate Municipal Instl LARGE BLEND FMIHX FMI Large Cap Long-Short FMLSX Wasatch-1st Source Long/Short SHORT GOVERNMENT FSGVX Federated US Govt 1-3 Yr Instl Muni Short FSHIX Federated Shrt-Interm Dur Muni Instl Short-Term Bond FSTIX Federated Short-Term Income Instl Intermediate-Term Bond FTRFX Federated Total Return Bond Instl Svc SMALL BLEND GABSX Gabelli Small Cap Growth AAA Communications GABTX GAMCO Global Telecommunications AAA LARGE GROWTH HCAIX Harbor Capital Appreciation Inv Foreign Large Blend HIINX Harbor International Inv WORLD STOCK HLMGX Harding Loevner Global Equity Advisor Foreign Large Growth HLMNX Harding Loevner International Equity Inv Equity Energy ICENX ICON Energy S China Region ICHKX Guinness Atkinson China & Hong Kong LARGE VALUE INDZX RiverSource Diversified Equity Inc A Moderate Allocation JABAX Janus Balanced T Health JAGLX Janus Global Life Sciences T LARGE GROWTH JAMRX Janus Research T Small Growth JATTX Janus Triton T Foreign Large Blend JETAX Artio International Equity II A Target Date 2021-2025 JNSAX JPMorgan SmartRetirement 2025 A LARGE BLEND JRMSX INTECH Risk-Managed Core T Target Date 2011-2015 JSFAX JPMorgan SmartRetirement 2015 A Target Date 2026-2030 JSMAX JPMorgan SmartRetirement 2030 A Target Date 2016-2020 JTTAX JPMorgan SmartRetirement 2020 A LARGE BLEND JUEAX JPMorgan US Equity A LARGE VALUE JVLAX JHancock3 Disciplined Value A Small Growth KGSCX Kalmar Growth-with-Value Small Cap LARGE GROWTH LGILX Laudus Growth Investors US Large Cap Gr WORLD BOND LIFNX Laudus Mondrian Intl Fixed Income Foreign Large Blend LISOX Lazard Intl Strategic Equity Open Multisector Bond LSBRX Loomis Sayles Bond Retail DIVERSIFIED PACIFIC/ASIA MAPIX Matthews Asia Pacific Equity Income PACIFIC/ASIA EX-JAPAN STK MAPTX Matthews Pacific Tiger Investor China Region MCHFX Matthews China Investor Muni National Interm MITFX Marshall Intermediate Tax-Free Inv JAPAN STOCK MJFOX Matthews Japan Investor Foreign Large Blend MKIEX McKee International Equity Instl DIVERSIFIED PACIFIC/ASIA MPACX Matthews Asia Pacific Investor High Yield Bond MWHYX Metropolitan West High Yield Bond M Short-Term Bond MWLDX Metropolitan West Low Duration Bond M Intermediate-Term Bond MWTRX Metropolitan West Total Return Bond M MID-CAP BLEND NMMCX Northern Multi-Manager Mid Cap SMALL VALUE NOSGX Northern Small Cap Value Muni National Long NOTEX Northern Tax-Exempt Small Growth NSPAX ING Small Cap Opportunities A Foreign Small/Mid Value OAKEX Oakmark International Small Cap I WORLD STOCK OAKGX Oakmark Global I COMMODITIES BROAD BASKET PCRDX PIMCO Commodity Real Ret Strat D Emerging Markets Bond PEMDX PIMCO Emerging Markets Bond D LARGE BLEND PEOPX Dreyfus S&P 500 Index WORLD BOND PFODX PIMCO Foreign Bond (USD-Hedged) D Intermediate-Term Bond PGBOX JPMorgan Core Bond A Multisector Bond PONDX PIMCO Income D LARGE BLEND PRBLX Parnassus Equity Income - Inv Inflation-Protected Bond PRRDX PIMCO Real Return D SMALL VALUE PSOAX JPMorgan Small Cap Value A Intermediate-Term Bond PTTDX PIMCO Total Return D SMALL BLEND RYTFX Royce Total Return Svc Intermediate-Term Bond SAMIX RidgeWorth Intermediate Bond I Foreign Large Blend SICNX Schwab International Core Equity Inst Foreign Large Blend SIEIX RidgeWorth Intl Equity Index I ULTRASHORT BOND SIGVX RidgeWorth US Gov Sec Ultra-Short Bd I Target Date 2031-2035 SRJAX JPMorgan SmartRetirement 2035 A DIVERSIFIED EMERGING MKTS SSEMX SSgA Emerging Markets Instl High Yield Bond STHTX RidgeWorth High Income I Muni National Interm STTBX RidgeWorth Investment Grade T/E Bond I LARGE BLEND SWANX Schwab Core Equity Inv Global Real Estate SWASX Schwab Global Real Estate Select Target Date 2026-2030 SWDRX Schwab Target 2030 LARGE VALUE SWDSX Schwab Dividend Equity Financial SWFFX Schwab Financial Services Target Date 2011-2015 SWGRX Schwab Target 2015 Intermediate Government SWGSX Schwab GNMA Long-Short SWHEX Schwab Hedged Equity Health SWHFX Schwab Health Care Target Date 2021-2025 SWHRX Schwab Target 2025 Intermediate-Term Bond SWIIX Schwab Premier Income Instl Foreign Large Blend SWISX Schwab International Index Retirement Income SWKRX Schwab Monthly Income Enh Payout Retirement Income SWLRX Schwab Monthly Income Max Payout LARGE GROWTH SWLSX Schwab Large-Cap Growth Foreign Large Growth SWMIX Laudus International MarketMasters Sel Small Growth SWMSX Laudus Small-Cap MarketMasters Select Muni National Interm SWNTX Schwab Tax-Free Bond Moderate Allocation SWOBX Schwab Balanced Inv LARGE BLEND SWPPX Schwab S&P 500 Index SMALL BLEND SWSSX Schwab Small Cap Index LARGE GROWTH TGCNX TCW Select Equities N Mid-Cap Growth TGDNX TCW Growth Equities N EQUITY PRECIOUS METALS TGLDX Tocqueville Gold LARGE BLEND TICRX TIAA-CREF Social Choice Eq Retail LARGE GROWTH TIRTX TIAA-CREF Large-Cap Growth Retail LARGE GROWTH TWCGX American Century Growth Inv Muni National Interm TWTIX American Century Interm-T Tx-Fr Bd Inv SHORT GOVERNMENT TWUSX American Century Short-Term Govt Inv LARGE VALUE TWVLX American Century Value Inv Foreign Large Value TWWDX Thomas White International Foreign Large Growth UMBWX Scout International SMALL VALUE VSFAX Federated Clover Small Value A Mid-Cap Growth WTMGX Westcore MIDCO Growth LARGE VALUE YAFFX Yacktman Focused Asset Class Number of funds Balanced Fund 21 REITs 2 Fixed Income 34 Commodity 1 Sector Fund 9 Foreign Equity 18 Emerging Market Equity 7 US Equity 41 Other 4 Total 137
As of Apr 5, 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 (98%)
Fund Quality -- Rated as average (54%)
Portfolio Building -- Rated as great (86%)
Overall Rating: above average (80%)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 5, 2011)Performance table (as of Apr 5, 2011)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Schwab OneSource Select List Funds Tactical Asset Allocation Moderate 13% 106% 10% 91% 13% 110% Schwab OneSource Select List Funds Strategic Asset Allocation Moderate 12% 152% 4% 32% 7% 52% Six Core Asset ETF Benchmark Tactical Asset Allocation Moderate 10% 81% 9% 82% 13% 89% Six Core Asset ETF Benchmark Strategic Asset Allocation Moderate 14% 121% 4% 20% 7% 34% With six asset classes and a wide number of funds, the returns beat the six asset class benchmark. With high scores in all categories, this plan delivers portfolios that have produced strong historical returns.
Symbols: SPY, VTI, EFA, VEU, EEM, VWO, IYR, VNQ, ICF, AGG, BND, DBC, HYG, JNK, PHB, AOM, AOK, CIU, BIV, ITM, MUB, TFI, PZA, MLN, IYH, IXJ, VHT, XBI, PBE, DBR, RYH, EFG, IXP, PTE, DGG, LTL, MTK, PTF, DBT, RYT, ROM, GWL, PFA, IVE, IWW, JKF, VTV, ELV, PWV, RPV, SCHV, SCZ, EFV, PID, DWM, IYF, VFH, IPF, PFI, DRF, RYF, IFGL, RWX, TZE, TZG, TZI, TZO, TZL, IGOV, BWX, WIP, IVV, IYY, IWV, VV, DLN, RSP, SCHX, IOO, VT, SHY, SHV, VGSH, PLK, USY, 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, IJS, IWN, JKL, VBR, DSV, PWY, RZV, UVT, IJR, IWM, JKJ, VB, DSC, PJM, DES, SAA, UWM, SCHA, GMM, PXH, DEM, SCHE, GBF, LAG, PCY, CSJ, BSV, VCSH, ITE, IXC, IPW, DBE, RYE, DKA, IEI, VGIT, IJK, IWP, VOT, EMG, PWJ, RFG, UKW, IJT, IWO, JKK, VBK, DSG, PWT, RZG, UKK, TIP, DBP, EPP, VPL, GMF, PAF, AAXJ, DND, EWJ, JPP, PJO, DXJ, GSG, BIL
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.
Originally from the UK, Jenny Hollingworth lives with her husband and two sons in Northern California. She is a wife, mother, writer, theatre director, coffee drinker, avid reader, keen walker, movie watcher, Jane Austen lover and observer of life, in no particular order. MyPlanIQ has no formal relationship with Jenny Hollingworth.
- E-Trade ETF Plan Hits Most of the High Notes
02/16/2011
ETrade All-Star ETF plan has recently been announced as no/low cost ETF plans become increasingly widespread. The company has attempted to make their selection on criteria such as low expense ratio, tracking error, liquidity, style purity, underlying holdings, and how well the ETF represents the index it seeks to replicate. In addition, ETFs chosen are passively managed, have at least 6-months trading history and are sponsored by a well balanced investment firm.
The growth in number of ETFs are such that many of them are still new. In our analysis, we ignore ETF's that have less than one year's history which may negatively impact returns in the short term but, over time, they will come on-line and provide greater diversification.The plan consists of 40 funds giving exposure to 5 major assets: US Equity, Foreign Equity, REITs, Emerging Market Equity, Fixed Income.
Asset Class Ticker Name LARGE BLEND RSP Rydex S&P Equal Weight LARGE BLEND SPY SPDR S&P 500 LARGE GROWTH IWF iShares Russell 1000 Growth Index LARGE GROWTH MGK Vanguard Mega Cap 300 Gr Index ETF LARGE VALUE IWD iShares Russell 1000 Value Index LARGE VALUE DIA SPDR Dow Jones Industrial Average LARGE VALUE VYM Vanguard High Dividend Yield Indx ETF LARGE VALUE MGV Vanguard Mega Cap 300 Value Index 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 IWM iShares Russell 2000 Index Small Growth IWO iShares Russell 2000 Growth Index SMALL VALUE IWN iShares Russell 2000 Value Index Emerging Markets Bond EMB iShares JPMorgan USD Emerg Markets Bond Emerging Markets Bond PCY PowerShares Emerging Mkts Sovereign Debt High Yield Bond HYG iShares iBoxx $ High Yield Corporate Bd High Yield Bond JNK SPDR Barclays Capital High Yield Bond Inflation-Protected Bond TIP iShares Barclays TIPS Bond Intermediate Government IEI iShares Barclays 3-7 Year Treasury Bond Intermediate Government AGZ iShares Barclays Agency Bond Intermediate Government ITE SPDR Barclays Capital Interm Term Trs Intermediate-Term Bond AGG iShares Barclays Aggregate Bond Intermediate-Term Bond CFT iShares Barclays Credit Bond Intermediate-Term Bond BIV Vanguard Intermediate-Term Bond ETF Intermediate-Term Bond BND Vanguard Total Bond Market ETF LONG GOVERNMENT TLH iShares Barclays 10-20 Year Treasury Bd Long-Term Bond BLV Vanguard Long-Term Bond Index ETF SHORT GOVERNMENT SHY iShares Barclays 1-3 Year Treasury Bond Short-Term Bond BSV Vanguard Short-Term Bond ETF WORLD BOND BWX SPDR Barclays Capital Intl Treasury Bond WORLD BOND BWZ SPDR Barclays Cap S/T Intl Treasury Bond WORLD BOND WIP SPDR DB Intl Govt Infl-Protected Bond DIVERSIFIED EMERGING MKTS BIK SPDR S&P BRIC 40 DIVERSIFIED EMERGING MKTS VWO Vanguard Emerging Markets Stock ETF Foreign Large Blend EFA iShares MSCI EAFE Index Foreign Large Value IDV iShares Dow Jones Intl Select Div Idx Foreign Small/Mid Value SCZ iShares MSCI EAFE Small Cap Index Global Real Estate RWO SPDR Dow Jones Global Real Estate REAL ESTATE RWR SPDR Dow Jones REIT This is a good selection of funds which hit the main notes -- good choices in fixed income and the US and choices for international and domestic real estate as well as multiple selections in Foreign and emerging market classes.
The US selections have one in the top ten performance ranking and so US there is room for improvement there.
TKRNameRank5 Yr AR%3yr AR%1yr AR%MPIQ ScoreIWOiShares Russell 2000 Growth53.73%5.45%39.77%55.4%VOVanguard Mid-Cap ETF123.60%3.05%36.00%47.8%VOTVanguard Mid-Cap Growth ETF130.00%3.26%42.68%47.6%IWNiShares Russell 2000 Value Index181.61%3.65%32.80%41.5%RSPRydex S&P Equal Weight193.45%3.58%27.38%39.7%IWMiShares Russell 2000 Index202.26%3.50%29.63%39.4%VOEVanguard Mid-Cap Value ETF220.00%2.95%29.26%33.7%DIASPDR DJ Industrial Average274.35%0.33%19.15%28.3%IWFiShares Russell 1000 Growth Index293%2.21%17.76%26.4%SPYSPDR S&P 500302.07%-0.11%21.68%25.7%IWDiShares Russell 1000 Value Index361.14%-2.81%18.67%16.7%MGKVanguard Mega Cap 300 GrowthNRVMGVVanguard Mega Cap 300 ValueNRVVYMVanguard High Dividend Yield IndxNRV
NRV means not ranked because the trading volume was below our cutoff
There is no commodity alternative. This may have been less important in the past, but with inflation almost inevitable, a commodities option such as DBC would make sense.As of Feb 15, 2011, this plan investment choice is rated as average based on MyPlanIQ's 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 (89%)
Fund Quality -- Rated as below average (17%)
Portfolio Building -- Rated as average (42%)
Overall Rating: average (49%)It is important to note that the fund quality rating is lower because of the lack of history -- as time marches on and the ETFs create more of a trail, we expect that rating to increase.
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 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
REITs: IYR or VNQ or ICF
Emerging Market Equity: EEM or VWO
Fixed Income: AGG or BND
Performance chart (as of Feb 15, 2011)Performance table (as of Feb 15, 2011)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Etrade All Star ETFs Tactical Asset Allocation Moderate 14% 117% 9% 69% 11% 71% Etrade All Star ETFs Strategic Asset Allocation Moderate 16% 146% 2% 12% 5% 19% Five Core Asset ETF Benchmark Tactical Asset Allocation Moderate 14% 124% 8% 65% 11% 72% Five Core Asset ETF Benchmark Strategic Asset Allocation Moderate 19% 157% 4% 18% 6% 24% Currently Real Estate, US Equity and Commodities are doing well. US Equity and Real Estate available to Etrade All Star ETFs participants.
The plan runs neck and neck with the benchmark but we would expect it to pull away as more of the funds establish history and can be used in the portfolio.
To summarize, Etrade All Star ETF plan ticks most of the boxes but would be strengthened by adding commodity choices.
Disclosure:
MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up 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,HYG,JNK,PHB,CIU,BIV,GWL,PFA,IVE,IWW,JKF,VTV,ELV,PWV,RPV,SCHV,SCZ,EFV,PID,DWM,IFGL,RWX,IGOV,BWX,WIP,IVV,IYY,IWV,VV,DLN,RSP,SCHX,SHY,SHV,VGSH,PLK,USY,TLT,TLH,IEF,EDV,VGLT,TLO,PLW,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,IJS,IWN,JKL,VBR,DSV,PWY,RZV,UVT,IJR,IWM,JKJ,VB,DSC,PJM,DES,SAA,UWM,SCHA,GMM,PXH,DEM,SCHE,CLY,LQD,BLV,VCLT,PCY,CSJ,BSV,VCSH,IEI,VGIT,ITE,IJK,IWP,VOT,EMG,PWJ,RFG,UKW,IJT,IWO,JKK,VBK,DSG,PWT,RZG,UKK,TIP,DBC
labels:IRA,Retirement,Investment,ETF,Portfolio,construction,
- American Express Provides Above Average Investment Choices in Its 401K Plan
12/06/2010
This report reviews AMERICAN EXPRESS RETIREMENT SAVINGS PLAN. We will discuss the investment choices and present the plan rating by MyPlanIQ. Current economic and market conditions are discussed in the context of the investment portfolios in the plan. We will then show how participants in AMERICAN EXPRESS RETIREMENT SAVINGS PLAN can achieve reasonable investment results using asset allocation strategies.
Plan Review and Rating
American Express Company provides charge and credit payment card products, and travel-related services worldwide. It offers a range of products and services, including charge and credit card products; expense management products and services; consumer and business travel services; stored value products, such as Travelers Cheques and prepaid products; network services; merchant acquisition, and merchant processing, point-of-sale, servicing and settlement, and marketing products and services for merchants; and fee services, including market and trend analyses along with related consulting services and customer loyalty and rewards programs. American Express was founded in 1850 and is headquartered in New York, New York.
AMERICAN EXPRESS RETIREMENT SAVINGS PLAN consists of 24 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
Foreign Large Blend: EFA, VEU, GWL, PFA
Foreign Large Value: EFV, PID, DWM
Foreign Small/mid Value: SCZ
Intermediate-term Bond: AGG, CIU, BIV, BND
Large Blend: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX
Long-term Bond: CLY, LQD, BLV, VCLT
Mid-cap Blend: IJH, IWR, JKG, VO, MDY, EMM, PJG, DON, EZM, MVV
Small Blend: IJR, IWM, JKJ, VB, DSC, PJM, DES, SAA, UWM, SCHA
Us Equity: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHXAs of Dec 2, 2010, this plan investment choice is rated as Above Average based on MyPlanIQ Plan Rating methodology that measures the effectiveness of a plan's available investment funds. It has the following detailed ratings:
Diversification -- Rated as Average (61%)
Fund Quality -- Rated as Average (60%)
Portfolio Building -- Rated as Good (96%)
Overall Rating: Above Average (75%)Current Economic and Market Conditions
We have experienced an uncertain 2010: plenty of worries on whether the US economy will climb out of the great recession and recover.
- The Federal Reserve embarked on Quantitative Easing II (QE2) to stimulate the economy.
- The housing market is still at its low but largely stabilized.
- The unemployment rate is stuck at 9%.
Americans continue to face an uncertain future, given (among others) the high unemployment rate, large federal and local government debts and global trade imbalance. With such an economic backdrop, the stock and debt markets are going to be volatile. Despite this, markets have been resilient and appear positioned to rebound.
In this market it is even more critical to properly diversify and respond market changes. MyPlanIQ offers two asset allocation strategies: strategic and tactical asset allocation strategies ( SAA and TAA for participants in AMERICAN EXPRESS RETIREMENT SAVINGS PLAN).
Strategic Asset Allocation is based on well known modern portfolio theory and its key features include: diversification, proper fund selection and periodically re-balancing.
Tactical Asset Allocation works on a diversified array of assets provided by funds in a plan and adjusts asset mixes based on market conditions such as asset price momentum utilized by TAA.
Portfolio Discussions
The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies. For comparison purpose, we also include the moderate model portfolios of a typical 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 Dec 2, 2010)Performance table (as of Dec 2, 2010)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe AMERICAN EXPRESS RETIREMENT SAVINGS PLAN Tactical Asset Allocation Moderate 5% 50% 10% 100% 14% 124% AMERICAN EXPRESS RETIREMENT SAVINGS PLAN Strategic Asset Allocation Moderate 13% 108% 3% 16% 9% 49% Four Core Asset ETF Index Funds Emerging Markets Tactical Asset Allocation Moderate 1% 6% 6% 49% 12% 78% Four Core Asset ETF Index Funds Emerging Markets Strategic Asset Allocation Moderate 10% 75% 2% 6% 7% 31% Currently, asset classes in US Equity (SPY,VTI), Foreign Equity (EFA,VEU), Emerging Market Equity (EEM,VWO) and Fixed Income (AGG,BND) are doing relatively well. These asset classes are available to AMERICAN EXPRESS RETIREMENT SAVINGS PLAN participants.
To summarize, AMERICAN EXPRESS RETIREMENT SAVINGS PLAN plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles.
labels:investment,
Symbols:AXP,SPY,VTI,EFA,VEU,EEM,VWO,AGG,BND,IVV,IYY,IWV,VV,DLN,RSP,SCHX,CIU,BIV,GWL,PFA,SCZ,EFV,PID,DWM,IJH,IWR,JKG,VO,MDY,EMM,PJG,DON,EZM,MVV,IJR,IWM,JKJ,VB,DSC,PJM,DES,SAA,UWM,SCHA,GMM,PXH,DEM,SCHE,CLY,LQD,BLV,VCLT, ,
- TD Ameritrade Commission Free ETF’s Empowers Both Strategic and Tactical Asset Allocation
10/19/2010
The recent news that TD Ameritrade are providing over 100 ETF’s commission free is a perfect fit for a retirement portfolio. Investors are able to trade once a month and pick from a wide range of ETF’s without incurring any trading fees. Combine this with an IRA where the tax consequences of trading are removed and you have an almost ideal scenario and back tested returns demonstrate the point.
There is a continuing dilemma between wanting to increase returns while mitigating downside risk against the perceived risk of adopting a tactical asset allocation strategy. It is clear that tactical asset allocation consistently delivers higher returns at a lower risk. At the same time many are uncomfortable moving away from buy and hold which has been the mantra over the past twenty years.
In a previous article we introduced the notion of a core-satellite portfolio where the assets are split between tactical and strategic asset allocation strategies as a way of introducing tactical asset allocation in a step-by-step fashion.
TD Ameritrade making so many ETF’s available commission free allows another alternative to be considered and that is maintaining classic strategic asset allocation – i.e. all asset classes are fully represented at all times but with so many funds in each class, use fund momentum to rotate styles such that the funds in each asset class are regularly optimized.
CategoryJan-08Jan-09Jan-10Apr-10Jul-10Oct-10US EquitiesIWNVUG, MGKIWNVIGIWSVOInternational EquitiesEWJEWGEWJEWAAAXJAAXJEmerging MarketsEWZEWZEWZILFVWOVWOReal EstateVNQVNQVNQVNQVNQVNQCommoditiesDBCDBCDBCDBCDBCDBCBalanced FundAOKAOKAOKAOKAOKFixed IncomeSHY, WIP, JNKSHM, BWXSHY, WIP, JNKVCSH, BWX, JNKCASH, AGG, JNKCASH, AGG, JNKWe used the MyPlanIQ system to build and monitor a moderate risk (40% fixed income) strategic asset allocation portfolio. With five risk based asset classes, each of those classes would have 12% of the assets dedicated to them but the funds would be evaluated every month and the optimal fund selected based on the momentum within the class.
This can be compared with a Six asset SIB for which there is just one fund in each asset class.
From the performance chart, it is clear that there is increased upside potential from being able to switch funds within an asset class. Unfortunately, there is less ability to minimize downside risk when an asset class is under downward pressure.Despite this, for those who want to stay with a buy and hold in terms of asset classes, using this approach can squeeze some extra returns from the strategy.
With the large number of funds in six asset classes, momentum based asset allocation can be seen in its best light.
Portfolio Performance ComparisonPortfolio Name1Yr AR1Yr Sharpe3Yr AR3Yr Sharpe5Yr AR5Yr Sharpe13%87%13%86%20%128%10%83%-1%-6%9%46%11%93%1%5%8%40%Takeaways- ETF’s provide the basis for an outstanding portfolio with either strategic or tactical asset allocation. This is clearly demonstrated with TD’s wide range of commission free funds
- Using a web based application takes a lot of the effort from finding the best funds for either strategy
- Strategic asset allocation with styles rotation can deliver solid results using a well trusted strategy
- Tactical asset allocation greatly benefits from the large number of funds
labels:investment,
Symbols:GSG,DBC,AOK,EEM,GMM,PXH,DEM,SCHE,PCY,VTI,VT,IEV,VGK,PEF,DEB,EFA,VEU,GWL,PFA,EFG,EFV,PID,DWM,IFSM,VSS,SCHC,SCZ,IFGL,RWX,HYG,JNK,PHB,TIP,IEI,VGIT,ITE,AGG,CIU,BIV,BND,EWJ,JPP,PJO,DXJ,IVV,IYY,IWV,VV,SPY,DLN,RSP,SCHX,IVW,IWZ,JKE,VUG,ELG,QQQQ,RPG,SCHG,IVE,IWW,Commission,Free,ETFs,Strategic,Asset,Allocation,Tactical,Asset,Allocation,Asset,Allocation,styles,rotation,
- Case Study: Hewlett Packard's 401K Plan
10/09/2010
- Bernstein's No Brainer and Smart Money Portfolios Reviewed
10/08/2010
- Diversification, Style AND Asset Rotation Improve Portfolio Performance without Incurring Extra Risk
10/08/2010
- Google’s 401K Plan: Another Good Employee Benefit
09/26/2010
- Armstrong Index Based Lazy Portfolio Returns Study
09/17/2010
- Getting Most out of Your Retirement Plan: A Case Study on Hewlett Packard 401K Plan
09/16/2010
- Schwab ETFs Review
07/27/2010
- AMERICAN EXPRESS RETIREMENT SAVINGS PLAN Report On 12/03/2010
12/03/2010
This report reviews AMERICAN EXPRESS RETIREMENT SAVINGS PLAN plan. We will discuss the investment choices and present the plan rating by MyPlanIQ. Current economic and market conditions are discussed in the context of the investment portfolios in the plan. We will then show how participants in AMERICAN EXPRESS RETIREMENT SAVINGS PLAN can achieve reasonable investment results using asset allocation strategies.
Plan Review and Rating
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AMERICAN EXPRESS RETIREMENT SAVINGS PLAN's 401K plan consists of 24 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
Foreign Large Blend: EFA, VEU, GWL, PFA
Foreign Large Value: EFV, PID, DWM
Foreign Small/mid Value: SCZ
Intermediate-term Bond: AGG, CIU, BIV, BND
Large Blend: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX
Long-term Bond: CLY, LQD, BLV, VCLT
Mid-cap Blend: IJH, IWR, JKG, VO, MDY, EMM, PJG, DON, EZM, MVV
Small Blend: IJR, IWM, JKJ, VB, DSC, PJM, DES, SAA, UWM, SCHA
Us Equity: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX
As of Dec 2, 2010, this plan investment choice is rated as based on MyPlanIQ Plan Rating methodology that measures the effectiveness of a plan's available investment funds. It has the following detailed ratings:
Diversification -- Rated as (61%)
Fund Quality -- Rated as (60%)
Portfolio Building -- Rated as (96%)
Overall Rating: (75%)Current Economic and Market Conditions
We have experienced an uncertain 2010: plenty of worries on whether the US economy will climb out of the great recession and recover.
- The Federal Reserve embarked on Quantitative Easing II (QE2) to stimulate the economy.
- The housing market is still at its low but largely stabilized.
- The unemployment rate is stuck at 9%.
Americans continue to face an uncertain future, given (among others) the high unemployment rate, large federal and local government debts and global trade imbalance. With such an economic backdrop, the stock and debt markets are going to be volatile. Despite this, markets have been resilient and appear positioned to rebound.
In this market it is even more critical to properly diversify and respond market changes. MyPlanIQ offers two asset allocation strategies: strategic and tactical asset allocation strategies ( SAA and TAA for participants in AMERICAN EXPRESS RETIREMENT SAVINGS PLAN).
Strategic Asset Allocation is based on well known modern portfolio theory and its key features include: diversification, proper fund selection and periodically re-balancing.
Tactical Asset Allocation works on a diversified array of assets provided by funds in a plan and adjusts asset mixes based on market conditions such as asset price momentum utilized by TAA.
Portfolio Discussions
The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies. For comparison purpose, we also include the moderate model portfolios of a typical 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 Dec 2, 2010)Performance table (as of Dec 2, 2010)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe AMERICAN EXPRESS RETIREMENT SAVINGS PLAN Tactical Asset Allocation Moderate 5% 50% 10% 100% 14% 124% AMERICAN EXPRESS RETIREMENT SAVINGS PLAN Strategic Asset Allocation Moderate 13% 108% 3% 16% 9% 49% Four Core Asset ETF Index Funds Emerging Markets Tactical Asset Allocation Moderate 1% 6% 6% 49% 12% 78% Four Core Asset ETF Index Funds Emerging Markets Strategic Asset Allocation Moderate 10% 75% 2% 6% 7% 31% Currently, asset classes in US Equity (SPY,VTI), Foreign Equity (EFA,VEU), Emerging Market Equity (EEM,VWO) and Fixed Income (AGG,BND) are doing relatively well. These asset classes are available to AMERICAN EXPRESS RETIREMENT SAVINGS PLAN participants.
To summarize, AMERICAN EXPRESS RETIREMENT SAVINGS PLAN plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles.
Symbols: AXP , SPY , VTI , EFA , VEU , EEM , VWO , AGG , BND , IVV , IYY , IWV , VV , DLN , RSP , SCHX , CIU , BIV , GWL , PFA , SCZ , EFV , PID , DWM , IJH , IWR , JKG , VO , MDY , EMM , PJG , DON , EZM , MVV , IJR , IWM , JKJ , VB , DSC , PJM , DES , SAA , UWM , SCHA , GMM , PXH , DEM , SCHE , CLY , LQD , BLV , VCLT
- TD Ameritrade Commission Free ETFs Report On 12/07/2010
12/07/2010