 |
Vanguard ETF: |  |
7.4%* |
|
Diversified Core: | |
8.1%* |
|
Six Core Asset ETFs: | |
7.3%* |
Articles on VCSH
- 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.
- Tactically Manage An Income Producing Portfolio With Commodity Exposure
03/25/2011
Coming out of the great recession, governments around the world have adopted loose monetary policies to prop up the economies. These include U.S. central bank's QE2 (Quantitative Easing act 2) and Euro Zone's bailout of troubling peripheral countries like Greece. The current natural disasters in Japan and other countries can only add more demand for the stimulus. These policies resulted in commodity hoarding, especially in material hungry emerging economies such as China.
It is critical to have anti-inflation anti-currency devaluation component. In this article, we explore the feasibility of adding commodity exposure to an income producing portfolio. Commodity ETFs are effective tools to cope with the current situations. In a portfolio that is designed to preserve capital for retirement needs. However, because of volatile and somewhat dangerous nature of commodites, one needs to actively manage such a portfolio by adopting tactical asset allocation strategies.
Income producing ETFs such as high yield stock ETFs and bond ETFs can be used to build a lower risk portfolio for retirement income producing purpose. We study the two plans: one is without commodity exposure and the other one with the exposure.Retirement Income ETFs with Commodities plan is an extension to Retirement Income ETFs: adding extra commodity asset class with PowerShares DB Commodity Index (DBC) and GreenHaven Continuous Commodity (GCC). This plan consists of 37 funds. These funds enable investors to gain exposure to 6 major assets: US Equity, Commodity, Foreign Equity, Emerging Market Equity, REITs, Fixed Income. Compared with Retirement Income ETFs, this plan has two additional ETFs that represent the extra commodity asset class.
The following is the list of the candidate ETFs in the Retirement Income ETFs with Commodities:
The list of minor asset classes covered by Retirement Income ETFs with Commodities Commodities Broad Basket: DBC, GCC
Diversified Emerging Mkts: EEM, VWO, DEM
Emerging Markets Bond: EMB, PCY
Foreign Large Value: PID, IDV
Global Real Estate: RWX
High Yield Bond: HYG
Inflation-protected Bond: TIP
Intermediate Government: IEI
Intermediate-term Bond: CIU, CORP, MBB
Large Blend: VIG
Large Value: DVY, SDY, VYM, FVD
Long Government: IEF, TLT
Long-term Bond: LQD, VCLT
Mid-cap Value: PEY
Miscellaneous Sector: PFF
Muni National Long: MUB
Muni Short: SHM
Real Estate: IYR, ICF, VNQ
Short Government: SHY
Short-term Bond: CSJ, VCSH
World Bond: BWX, WIPAs of Mar 24, 2011, Retirement Income ETFs with Commodities investment choice is rated as and Retirement Income ETFs investment choice is rated as 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:
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).
Performance chart (as of Mar 24, 2011)
Performance table (as of Mar 24, 2011)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Retirement Income ETFs with Commodities Tactical Asset Allocation Moderate 10% 79% 8% 68% 11% 83% Retirement Income ETFs with Commodities Strategic Asset Allocation Moderate 11% 97% 1% 4% 4% 20% Retirement Income ETFs Tactical Asset Allocation Moderate 7% 40% 8% 65% 10% 62% Retirement Income ETFs Strategic Asset Allocation Moderate 11% 69% 3% 14% 5% 17% Discussions:
1. Commodity ETFs are volatile. In fact, PowerShare DB Commodity Index ETF (DBC) lost 32% in 2008 while iShares S&P GSCI Commodity Index (GSG) lost a whopping 46% in the same year.
2. Simply adding commodity ETFs to a strategic asset allocation portfolio (buy and hold with regular rebalancing) did not improve the returns in the past five years. This is again due to the big loss incurred in commodtiy ETFs.
3. Adding commodity ETFs as fund candidates in a tactical asset allocation portfolio, however, can improve returns. In the past five years, Retirement Income ETFs with Commodities Tactical Asset Allocation Moderate had extra 1% annualized return over Retirement Income ETFs Tactical Asset Allocation Moderate.
In conclusions. commodity ETFs are effective tools to cope with the current situations. In a portfolio that is designed to preserve capital for retirement needs. However, because of volatile and somewhat dangerous nature of commodites, one needs to actively manage such a portfolio by adopting tactical asset allocation strategies.
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:DBC,GCC,GSG,EEM,VWO,DEM,EMB,PCY,PID,IDV,RWX,HYG,TIP,WIP,IEI,CIU,CORP,MBB,VIG, DVY,SDY,VYM,FVD,IEF,TLT,LQD,VCLT,PEY,PFF,MUB,SHM,IYR,ICF,VNQ,SHY,CSJ,VCSH,BWX,
Exchange Tickers: (DBC),(GCC),(GSG),(EEM),(VWO),(DEM),(EMB),(PCY),(PID),(IDV),(RWX),(HYG),(TIP),(WIP),(IEI),(CIU),(CORP),(MBB),(VIG),(DVY),(SDY),(VYM),(FVD),(IEF),(TLT),(LQD),(VCLT),(PEY),(PFF),(MUB),(SHM),(IYR),( ICF),(VNQ),(SHY),(CSJ),(VCSH),(BWX)
- Shell Versus Morningstar -- More is Better
02/27/2011
We recognize that technology continually changes the world charging into every aspect of our lives. Investing has also been significantly changed with instant access to news and the lead measured in milliseconds. Significant swings of the market can be impacted by the touch of a button.
For the longterm or retirement investor, the impact is more muted but still present and with the emergence of new investing apps, perhaps a larger change is occurring. Historically, plans for the long term investor have been limited to a relatively few funds, hopefully well chosen to give an easily comprehensable set of choices that still enable the creation of a strong portfolio to deliver good returns.
We have already reported on what we think is one of the best --Morningstar's 401K plan has only 26 funds that give access to six major assst classes. Based on MyPlanIQ's Plan Rating methodologythey achieve top ratings. This is about as good as it gets -- good diversification, great choice of funds, ability to create a non correlated portfolio and strong historical returns.
However, if we have access to applications that will automatically sift and sort a large number of funds, do we need to limit the number of funds in a plan?
To contrast this, we also reviewed a Shell 401k Plan which offers an extraordinary number of funds -- which we compare with the Morningstar alternatives.
Asset Class
Shell
Morningstar
Balanced Fund 28 1 REITs 3 1 Fixed Income 43 6 Commodity 0 1 Sector Fund 40 1 Foreign Equity 31 2 Emerging Market Equity 8 2 US Equity 143 11 Other 7 1 Total 303 26 Without a technological solution, the number of funds in the Shell plan is overwhelming, but if there is an application to sort and select, more funds can actually be better.
We can compare the rating of both plans.
Attribute Shell Morningstar Diversification Great (98%) Great (96%) Fund Quality Average (37%) Average (72%) Portfolio Building Great (88%) Great (96%) Overall Rating Above Average (76%) Above Average (89%) The Shell plan wins in diversification by having excellent coverage of the five main asset classes and some of the sub-classes which contribute to better returns. Morningstar is close behind with one more major asset class but less coverage of the secondary styles.
Morningstar funds are higher quality making it easier to select a strong portfolio which makes it easier to build a portfolio and hence Morningstar comes out on top in the ratings.
If we now compare historical results of the two plans:
Performance table (as of Feb 23, 2011)Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Royal Dutch Shell Tier III 401K Tactical Asset Allocation Moderate 9% 110% 11% 108% 14% 111% Royal Dutch Shell Tier III 401K Strategic Asset Allocation Moderate 13% 183% 2% 15% 5% 29% Morningstar Inc 401K Plan Tactical Asset Allocation Moderate 21% 170% 13% 125% 14% 127% Morningstar Inc 401K Plan Strategic Asset Allocation Moderate 14% 179% 3% 25% 5% 36% We see that in the five year time horizon, the performance of the plans are nearly identical -- note that the Sharpe index is higher for the Morningstar plan.
This nicely contrasts the brute force and elegant approach to retirement fund planning.
What we see going forward are more and more ETF plans with many alternatives in them (Vanguard has 64, TD Ameritrade has 101) that offer more of the brute force alternatives.
With investing apps to sort and rank the choices, this should enable investors to leverage these plans to get good returns at a low cost.
Disclosure:
MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
Symbols:SPY,VTI,EFA,VEU,EEM,VWO,IYR,VNQ,ICF,AGG,BND,DBC,HYG,JNK,PHB,AOM,CIU,BIV,GWL,PFA,IVE,IWW,JKF,VTV,ELV,PWV,RPV,SCHV,EFV,PID,DWM,IYF,VFH,IPF,PFI,DRF,RYF,IVV,IYY,IWV,VV,DLN,RSP,SCHX,SHY,SHV,VGSH,PLK,USY,IVW,IWZ,JKE,VUG,ELG,QQQQ,RPG,SCHG,IJJ,IWS,JKI,VOE,EMV,PWP,RFV,UVU,IJS,IWN,JKL,VBR,DSV,PWY,RZV,UVT,IJR,IWM,JKJ,VB,DSC,PJM,DES,SAA,UWM,SCHA,GMM,PXH,DEM,SCHE,GBF,LAG,CSJ,BSV,VCSH,IJK,IWP,VOT,EMG,PWJ,RFG,UKW,TIP,GSG,
- 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,
- You Can Do Better Than Your Pension Funds
01/12/2011
With many public pension funds under performing in recent years, state and local governments have to increase current employees' contribution to fund the benefits. Employees and retirees in public sectors are feeling greater pressure to take care of their own finance.
A Bloomberg article in October 2010 reported that the largest pension fund Calpers (California Public Employees' Retirement System) had $240 Billion unfunded liabilities. Let's take a closer look at Calpers' portfolio and its performance.
Based on Calpers' latest annual report for fiscal year ended 6/2009 (we can not find the annual report for fiscal 2010), the following is its last 10 year's performance.
The following table shows the asset allocation from the same report. It is reasonable to assume Calpers' risk profile is about 60-70% in risk assets and 40-30% in fixed income.
From the same Bloomberg article, it was reported that Calpers achieved about 11% return in their 2010 fiscal year (7/2009 to 6/2010). With that in mind, we estimated that Calpers achieved about 3.2% annualized return from 7/2001 to 6/2010.
3.2% in the last 9 years can only barely keep up with the CPI increase. But that is Calpers, one of the largest public pension plan that has plenty of resources to hire high power hedge fund managers, venture capital investment managers, influence corporate governance and invest in real estates in its own fund. The last two financial downturns have inflicted severe damage to the behemoth.
It is a natural question to ask: can an individual do better than pension funds like Calpers? For California public employees, they are entitled to invest in defined contribution or deferred compensation retirement plans such as California State University and Public Employees Savings Plus Plan (or see the original plan 401(k)/457 page for more details). The investment choices could be found in this current fund performance document.Currently, the plan consists of 12 funds. These funds enable participants to gain exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income. The list of minor asset classes covered:
Foreign Large Blend: EFA, VEU, GWL, PFA
Intermediate-term Bond: AGG, CIU, BIV, BND
Large Blend: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX
Mid-cap Blend: IJH, IWR, JKG, VO, MDY, EMM, PJG, DON, EZM, MVV
Short-term Bond: CSJ, BSV, VCSH
Small Blend: IJR, IWM, JKJ, VB, DSC, PJM, DES, SAA, UWM, SCHAFor a moderate portfolio, MyPlanIQ Strategic Asset Allocation strategy invests in a fixed equal amount in US Equity and Foreign Equity (both are about 30%) and about 40% in fixed income. The strategy looks at the allocations monthly and decides whether to re-balance the portfolio using the best funds available in an asset class.
The portfolio's performance is as follows:
From 12/31/2000 To 01/10/20112001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1 Yr 3 Yr 5 Yr Inception Annualized Return (%) -1.6 -7.5 25.2 14.02 8.63 12.49 8.94 -24.91 22.15 10.84 -0.19 8.01 0.88 3.95 5.78 Sharpe Ratio (%) -37.09 -70.43 286.32 169.36 102.65 120.39 59.36 -114.7 127.65 91.57 -3.82 68.11 2.97 16.7 34.88
From the portfolio historical data, we derive 4.9% annualized return from 7/2001 to 6/2010. This beats Calpers' pension fund by additional 1.7% annually.
Notice the Strategic Asset Allocation strategy only uses the 12 funds available in the plan and adheres to buy-and-hold principle with periodical re-balance and fund selection. With only three major classes (US Equity, International Equity and Fixed Income) in the plan, the strategy periodically selects best funds from each asset class and re-balances the portfolio. This does show the benefit of fund selection (mainly through style rotation such as large cap to small cap value etc.).The takeaway is that a public employee can do better than its pension fund by adopting sound asset allocation strategy and manage his/her portfolio periodically. One does not need to have fancy hedge funds, private equity or venture investment to achieve better returns.
labels:investment,
Symbols:SPY,VTI,EFA,VEU,AGG,BND,CIU,BIV,GWL,PFA,IVV,IYY,IWV,VV,DLN,RSP,SCHX,IJH,IWR,JKG,VO,MDY,EMM,PJG,DON,EZM,MVV,IJR,IWM,JKJ,VB,PJM,DES,SAA,UWM,SCHA,CSJ,BSV,VCSH,
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- Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan Report On 12/03/2010
12/03/2010
This report reviews Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account 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 Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan can achieve reasonable investment results using asset allocation strategies.
Plan Review and Rating
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Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan's 401K plan consists of 55 funds. These funds enable participants to gain exposure to 5 major assets: US Equity, Foreign Equity, Commodity, Emerging Market Equity, Fixed Income. The list of minor asset classes covered:
Commodities Broad Basket: GSG, DBC
Conservative Allocation: AOK
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
Foreign Large Blend: EFA, VEU, GWL, PFA
Foreign Small/mid Growth: IFSM, VSS, SCHC
Health: IYH, IXJ, VHT, XBI, PBE, DBR, RYH
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
Latin America Stock: ILF, GML
Long Government: TLT, TLH, IEF, EDV, VGLT, TLO, PLW
Mid-cap Value: IJJ, IWS, JKI, VOE, EMV, PWP, RFV, UVU
Multisector Bond: AGG, GBF, BND, LAG
Natural Resources: IYM, IGE, VAW, XLB, XME, PYZ, DBN, RTM, UYM
Pacific/asia Ex-japan Stk: EPP, AAXJ, GMF, PAF, DND
Short Government: SHY, SHV, VGSH, PLK, USY
Short-term Bond: CSJ, BSV, VCSH
Small Growth: IJT, IWO, JKK, VBK, DSG, PWT, RZG, UKK
Technology: MTK, PTF, DBT, RYT, ROM
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 (91%)
Fund Quality -- Rated as (48%)
Portfolio Building -- Rated as (84%)
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 Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account 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 Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan Tactical Asset Allocation Moderate 6% 44% 7% 51% 16% 109% Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan Strategic Asset Allocation Moderate 12% 119% 3% 21% 9% 61% 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 Foreign Equity (EFA,VEU), Emerging Market Equity (EEM,VWO) and Fixed Income (AGG,BND) are doing relatively well. These asset classes are available to Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan participants.
To summarize, Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles.
Symbols: ATI , SPY , VTI , EFA , VEU , EEM , VWO , AGG , BND , DBC , AOK , CIU , BIV , IYH , IXJ , VHT , XBI , PBE , DBR , RYH , IYM , IGE , VAW , XLB , XME , PYZ , DBN , RTM , UYM , MTK , PTF , DBT , RYT , ROM , GWL , PFA , IVE , IWW , JKF , VTV , ELV , PWV , RPV , SCHV , IVV , IYY , IWV , VV , DLN , RSP , SCHX , 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 , IFSM , VSS , SCHC , GMM , PXH , DEM , SCHE , GBF , LAG , CSJ , BSV , VCSH , ITE , IXC , IPW , DBE , RYE , DKA , ILF , GML , IJT , IWO , JKK , VBK , DSG , PWT , RZG , UKK , TIP , EPP , VPL , GMF , PAF , AAXJ , DND , GSG
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