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Articles on VFINX

  • Balanced Portfolios Delivered Better Returns and Lower Risk

    10/18/2011

    John Wasik at Reuters wrote the following article Balancing your portfolio in a bonkers market. He stated:

    "Long-term, the middle route makes a huge difference. From 1926 through 2010, according to a recent T. Rowe Price study, a balanced portfolio delivered returns above 10 percent almost as frequently as an all-stock portfolio — with 40 percent less volatility."

    "You could also build a balanced portfolio on your own by buying the two SPDR funds I mentioned above. Buy them through a deep-discount broker or find their equivalents commission-free through Fidelity Investments, Charles Schwab or the Vanguard Group.

    Want to take the balanced approach one-step further? Consider an ultra-balanced approach with at least 12 separate funds representing seven asset classes, such as the ones found in the 7-12 portfolio. Over the past five years, the passive version of 7-12 has returned 4.8 percent, compared with 3.87 percent for the Vanguard Balanced Index and 0.71 for the Vanguard 500 Index fund, according to Israelsen, who designed the portfolio."

    Read the complete article here >>

    Meanwhile, MyPlanIQ maintains a list of lazy portfolios on Lazy Portfolios. You can find that on ETFs or Mutual Fund Portfolios.

    Also, check out Israelsen's 7Twelve lazy portfolio/plan.

    To compare S&P 500 (Vanguard 500 Index Fund VFINX) performance with Vanguard Balanced Index Fund (standard 60% US stocks, 40% bonds balanced funds VBINX), click here.

    You can also find a quote and its total return performance in a given period by going to a quote page such as VFINX and click on 'Total Returns and Statistics' tab.

    Symbols: SPX, COMP, SPY, VBINX, VFINX, Portfolio Management

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  • 403B Investments: University of California Retirement Savings Program Review

    09/16/2011

     

    University of California systems is the largest public university system in the nation. It provides its faculties and staff 457(b) deferred compensation, defined contribution and 403(b) tax deferred plans with UC Core Funds and a set of supplemental low cost funds from Vanguard, Dimensional Funds and Dreyfus. Please refer to its annual report of June 2010 for more information.

    This report reviews University of California Retirement Savings Program plan. We discuss its investment options and presents the plan rating by MyPlanIQ. Asset allocation investment portfolios are examined. We then show how plan participants in University of California Retirement Savings Program can achieve reasonable investment results using portfolio management and risk management strategies for their 401k investments.

    We form University of California Retirement Savings Program using funds reported in the annual report. UC Core funds are represented by corresponding Vanguard index funds as proxies.

    The plan consists of 15 funds. These funds enable participants to gain exposure to 5 major assets: US Equity, Foreign Equity, REITs, Emerging Market Equity, Fixed Income.

     

    Asset Class Ticker Name
    SMALL BLEND VSMAX Vanguard Small Cap Index Adm
    DIVERSIFIED EMERGING MKTS DFEMX DFA Emerging Markets I
    REAL ESTATE VGSLX Vanguard REIT Index Adm
    LARGE GROWTH VFTSX Vanguard FTSE Social Index Inv
    ROOT CASH CASH
    Short-Term Bond VBISX Vanguard Short-Term Bond Index Inv
    Intermediate-Term Bond VBTLX Vanguard Total Bond Market Index Adm
    SHORT GOVERNMENT STABLEVALUE STABLEVALUE
    LARGE BLEND IWV iShares Russell 3000 Index
    LARGE BLEND VFINX Vanguard 500 Index Investor
    Foreign Large Blend EFA iShares MSCI EAFE Index
    Inflation-Protected Bond VIPSX Vanguard Inflation-Protected Secs Inv
    Moderate Allocation CFUNX C/Funds:C/Fund

    As of Sep 15, 2011, this plan investment choice is rated as 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 above average (84%)
    Fund Quality -- Rated as below average (24%)
    Portfolio Building -- Rated as above average (78%)
    Overall Rating: average (64%)

    The plan has a good diversification score as it covers the five major asset classes. In the US stock asset class, it has small and large cap style funds. All of these are low cost index funds.

    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 Sep 15, 2011)

    Performance table (as of Sep 15, 2011)

    In the last 5 year time span, the UC Plan beats the SIB 5 core portfolios in both strategic and tactical asset allocation categories. This indicates that extra minor asset classes (such as small/large cap) do provide additional opportunities for better portfolio management and risk management.

    To summarize, participants in University of California Retirement Savings Program plan can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles. Diversification and proper risk management are the two major key factors in retirement investments (in this case, 403b investments).

    Symbols: SPX, QQQQ, IWV, EFA, VTI, VEU, VWO, VNQ, BND, VSMAX, DFEMX, VGSLX, VFTSX, VBISX, VBTLX, VFINX, VIPSX, CFUNX, FSLBX, Retirement Investments, 403b Investments, Portfolio Management, Risk Management

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  • Two Factors That Make Picking Stocks So Hard

    07/08/2011

    Lowell Herr at ITA Wealth Management published an excellent article on SeekingAlpha.com on the difficulty of picking stocks. In the article, he gave the following two factors:

    • There are too many metrics to measure a stock such as growth, value, cash flow, momentum etc. Let's say there are 10 metrics to pick a stock and you would like to choose only two metrics out of these ten. This would mean that you have 10!/3!*(10-3)! = 120 ways to select these two metrics, let alone for each metric, you have to again arrive correct threshold numbers.
    • You are trading against great investors like Warren Buffett. This further diminishes your odds of winning.

    He concluded that the best way for average individual investors to invest is through diversified index funds and focuses on asset allocaitions (we might add). See how a simple asset allocation strategy with only 6 ETFs (VTI, VEU, VWO, VNQ, DBC, BND) as candidate funds would beat many pros. The following shows the performance comparison among Six Core Asset Strategic and Tactical Asset Allocation moderate portfolios and some balanced funds such as Vanguard Balanced Fund Index (VBINX), Vanguard 500 Index (tracking S&P 500) and Fidelity Asset Manager 60% (60% in stocks).

    Portfolio/Fund Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
    VFINX 28% 222% 4% 11% 3% 7%
    VBINX 19% 244% 6% 31% 5% 27%
    Six Core Asset ETFs Tactical Asset Allocation Moderate 17% 191% 10% 72% 15% 105%
    Six Core Asset ETFs Strategic Asset Allocation Moderate 20% 234% 5% 24% 8% 39%
    FSANX 24% 253% 7% 35%  

    For more performance comparison info, see here.

    Symbols: VTI, VEU, VWO, VNQ, DBC, BND, VFINX, SPY, VBINX, FSANX, Asset Allocation

    Exchange Symbols: (VTI), (VEU), (VWO), (VNQ), (DBX), (BND), (SPY)

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  • Beating The Market Is Easy: Just Make Lots of Noise To Confuse

    06/27/2011

    Jason Zweig, the Wall Street Journal's The Intelligent Investor's columnist recently wrote: "Beating the market is easy. Just understate its performance. Various investment promoters are touting their stock-picking prowess by comparing their returns, including dividends, to the Standard & Poor's 500-stock index without dividends."

    In the article, he specifically referred to The Street.com's Jim Cramer's recent email promotion. We quoted the article here: "with the subject line "My portfolio is CRUSHING the S&P 500," the email said Action Alerts PLUS is "producing some truly incredible results." From Jan. 1, 2002, to April 1, said the email, the portfolio's "total average return has averaged more than DOUBLE the return of the S&P 500." An accompanying bar graph showed the S&P 500 returning 15.5%, versus 39.2% for Mr. Cramer's portfolio."

    But if you included the S&P dividend in the calculation, the cumulative performance of Action Alerts PLUS would be only 0.9% higher over the total S&P 500 return. Yes, it is still higher, but it also comes with 774 trades in the past 3 years, not counting the annual subscription fee of $299.95 (the first year).

    Cramer is not alone. There are tons of this 'oversight' promotion touting products that beat S&P 500 or other market indices big time.

    Do you want to get the excitement and confused? That would be up to you. In the meantime, if you want to a simple yet trackable portfolio, day in and day out, look at MyPlanIQ's Six Core Asset ETFs that consists of only six ETFs: VTI, VEU, VWO, VNQ, DBC, BND. Here are the portfolio performance comparison:

     

    Portfolio Performance Comparison

    Portfolio/Fund Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
    Six Core Asset ETFs Strategic Asset Allocation Moderate 16% 159% 4% 16% 8% 39%
    Six Core Asset ETFs Tactical Asset Allocation Moderate 12% 123% 8% 68% 15% 107%
    SPY 20% 107% 1% -1% 2% 4%
    VBINX 14% 139% 4% 20% 5% 25%
    VFINX 19% 106% 1% -0% 2% 4%


    More detailed comparison, see here.

    By the way, all of our performance numbers are total return (i.e. including dividend reinvested) based. You won't conveniently misled due to some oversight errors.

    Symbols: VTI, VEU, VWO, VNQ, SPY, DBC, BND, VFINX, VBINX, Portfolio Strategy

    Exchange Tickers: (VTI), (VEU), (VWO), (VNQ), (SPY), (DBC), (BND)

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  • First Pacific Advisors (FPA) Bob Rodriguez: Another Crash Coming

    06/08/2011

    Robert Rodriguez is the CEO of First Pacific Advisors (FPA). He managed the famed FPA Capital (FPPTX) and FPA New Income (FPNIX). He was twice named Morningstar's fixed-income manager of the year (2001 & 2008).

    After taking a one year sabbatical in 2010, he came back to find that the world was still the same: problems that caused the financial crisis in 2008 had not been resolved. Here are some key points he made in a recent Fortune Magazine's article on Rodriguez:

    • U.S. debt as a percentage of GDP ratio (currently 64%) is massively underreported because it doesn't count off-balance-sheet entitlements such as Medicare, and debt owed by Fannie and Freddie. If you factor in those liabilities, the ratio will be over 500%!
    • The situation isn't irreparable: both parties are not willing to take drastic measures, let alone we are approaching to the election year. 
    • FPA Capital (FPPTX) is now 30% in cash (he had that before 2008) and 38% in energy sector (XLE). He refused to buy other sectors and even long term or intermediate term bonds (LQD) (TLT), (IEF).

    At the end, as what the article stated: " A former Republican, he describes himself as a "fiscal conservative but social moderate" who has grown disgusted with both parties: "I say, 'A pox on both their houses.'""

    The following is the chart of FPPTX vs. VFINX (Vanguard 500 Index):

     

    The following is the performance comparison between FPPTX and Six Core Asset ETFs Tactical Asset Allocation Moderate.

    Portfolio Performance Comparison

    Portfolio/Fund Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
    FPPTX 39% 198% 8% 31% 7% 27%
    Six Core Asset ETFs Tactical Asset Allocation Moderate 16% 128% 9% 79% 15% 104%


    See Here for more detailed comparison.

    See Here for another fund FPA Crecent's recent asset allocation analysis.

    Symbols: SPY, TLT, XLE, IEF, FPPTX, FPNIX, VFINX

    Exchange Tickers: (SPY), (TLT), (XLE), (IEF), (FPPTX), (FPNIX), (VFINX)

     

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  • REIT and Commodities In Simple Six Fund Portfolio Shows Up Aronson's Lazy Portfolio

    04/20/2011

  • REIT and Commodities In Simple Six Fund Portfolio Shows Up Aronson's Lazy Portfolio

    04/19/2011

  • Armstrong's Informed Investor Lazy Portfolio Feels The Commodities Pain

    04/18/2011

  • Bernstein No Brainer and Smart Money Lazy Portfolios Under The Microscope

    04/15/2011

  • Investing with Styles Can Pay off

    07/09/2010

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