This article is part of a series of case studies we are conducting for various 401K plans. In this article, we will discuss how participants in Apple 401K can achieve reasonable investment results using asset allocation strategies. We will also discuss how those portfolios are positioned in today’s market environment.
Apple Inc., (Ticker: AAPL) together with subsidiaries, designs, manufactures, and markets personal computers, mobile communication devices, and portable digital music and video players, as well as sells various related software, services, peripherals, and networking solutions. The company sells its products worldwide through its online stores, retail stores, direct sales force, third-party wholesalers, resellers, and value-added resellers. In addition, it sells various third-party Macintosh, iPhone, and iPod compatible products, including application software, printers, storage devices, speakers, headphones, and various other accessories and peripherals through its online and retail stores, and digital content and applications through the iTunes Store. The company sells its products to consumer, small and mid-sized business, education, enterprise, government, and creative customers. As of September 26, 2009, it had 273 retail stores, including 217 stores in the United States and 56 stores internationally. The company, formerly known as Apple Computer, Inc., was founded in 1976 and is headquartered in Cupertino, California.
Apple offers generous benefits to its employees. It was the first high tech company in Bay Area that offered free day care for employees' children.
Apple 401K's 401K plan consists of 14 funds. These funds enable participants to gain exposure to 4 major assets: US Equity, Foreign Equity, REITs, Fixed Income. Four Core Asset Index Funds REITs's 401K plan consists of funds. These funds enable participants to gain exposure to 4 major assets: US Equity, Foreign Equity, REITs, Fixed Income.
| The list of minor asset classes covered by Apple 401K | The list of minor asset classes covered by Four Core Asset Index Funds REITs |
|---|---|
| Asset Class | Apple 401K | Four Core Asset Index Funds REITs | ||
|---|---|---|---|---|
| Total | 14 |
As of May 27, 2011, Apple 401K investment choice is rated as average and Four Core Asset Index Funds REITs investment choice is rated as 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:
| Attribute | Apple 401K | Four Core Asset Index Funds REITs | ||
|---|---|---|---|---|
| Diversification | above average (85%) | |||
| Fund Quality | below average (15%) | No Rating | ||
| Portfolio Building | average (59%) | No Rating | ||
| Overall Rating | average (54%) | No Rating |
The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies (SAA and TAA , both provided by MyPlanIQ). For comparison purpose, we also include the moderate model portfolios of a typical 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
REITs: IYR or VNQ or ICF
Fixed Income: AGG or BND
Performance chart (as of May 27, 2011)
Performance table (as of May 27, 2011)
| Portfolio Name | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
|---|---|---|---|---|---|---|
| Apple 401K Tactical Asset Allocation Moderate | 12% | 159% | 9% | 122% | 9% | 99% |
| Apple 401K Strategic Asset Allocation Moderate | 14% | 225% | 4% | 27% | 5% | 32% |
| Four Core Asset Index Funds REITs Tactical Asset Allocation Moderate | 10% | 88% | 8% | 81% | 10% | 85% |
| Four Core Asset Index Funds REITs Strategic Asset Allocation Moderate | 17% | 158% | 4% | 19% | 6% | 24% |
Currently are doing well. But these asset classes are not available to Apple 401K participants.
To summarize, Apple 401K plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles.
Currently, the tactical asset allocation strategy indicates overweighing on
Foreign Equity, REITs
and Fixed Income
funds.
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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