Retirement investing is a long term process. This report reviews Hewlett Packard 401K 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 investors in Hewlett Packard 401K can achieve reasonable investment results using asset allocation strategies.
Plan Review and Rating
Hewlett Packard (Ticker:HPQ) has the "Hewlett Packard 401K".
Hewlett Packard Company (commonly known as 'HP') (NYSE: HPQ) is one of the largest IT companies. Founded by Bill Hwelett and Dave Packard in Palo Alto, California, HP was the earliest technology company that eventually led the formation of Silicon Valley in the San Francisco bay area. Today Hewlett-Packard has over 300 thousands employees world wide.
HP is renown to be employee friendly. It has been named several times as one of the best companies to work for. Its 401k plan provides a fairly diversified array of high quality funds.
Hewlett Packard 401K's 401K plan consists of 29 funds. These funds enable participants to gain exposure to 5 major assets: US Equity, Foreign Equity, Emerging Market Equity, REITs, Fixed Income.
As of Jun 13, 2011, 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 great
(97%)
Fund Quality -- Rated as average
(62%)
Portfolio Building -- Rated as above average
(65%)
Overall Rating: above average
(74%)
Current Economic and Market Conditions
Last week marked the sixth week of losses in the U.S. stock market. Investors are now clearly in a risk off mode. Key observations include
- U.S. stock market index (Vanguard Total Stock Market Index (VTI)), for example, is now ranked below U.S. 7-10 long term treasury bonds (IEF) and just a notch above credit bond index (CFT) in our major trend table.
- For the time being, commodities (DBC) and Gold (GLD) are still holding first places, with international REITs (RWX) is still strong.
- On the fixed income side, long bonds (TLT) (LQD) are now trending higher while emerging market bonds (PCY) is still holding a higher place.
This shows investors' strong risk aversion but it is still not water shed flight to safety moment yet. Again, we are vigilant to monitor how markets are unfolding here.
For more information on how these assets are ranked, please see here.
| Assets Class | Symbols | 05/27 Trend Score | 05/20 Trend Score | Direction |
|---|---|---|---|---|
| International REITs | RWX | 11.77% | 10.82% | ^ |
| Commodities | DBC | 10.84% | 10.32% | ^ |
| US Equity REITs | VNQ | 10.77% | 10.41% | ^ |
| Gold | GLD | 9.42% | 10.06% | v |
| Emerging Market Stks | VWO | 8.56% | 6.72% | ^ |
| US Stocks | VTI | 8.29% | 8.23% | ^ |
| International Developed Stks | EFA | 6.77% | 5.23% | ^ |
| US High Yield Bonds | JNK | 6.37% | 6.37% | v |
| International Treasury Bonds | BWX | 5.96% | 4.66% | ^ |
| Frontier Market Stks | FRN | 4.05% | 4.27% | v |
| Emerging Mkt Bonds | PCY | 3.57% | 4.27% | v |
| Intermediate Treasuries | IEF | 2.71% | 2.39% | ^ |
| US Credit Bonds | CFT | 2.5% | 2.81% | v |
| Municipal Bonds | MUB | 2.13% | 2.0% | ^ |
| Total US Bonds | BND | 1.99% | 1.92% | ^ |
| Mortgage Back Bonds | MBB | 1.75% | 1.8% | v |
| Treasury Bills | SHV | 0.07% | 0.02% | ^ |
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
Emerging Market Equity: EEM or VWO
REITs: IYR or VNQ or ICF
Fixed Income: AGG or BND
Performance chart (as of Jun 13, 2011)
Performance table (as of Jun 13, 2011)
| Portfolio Name | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
|---|---|---|---|---|---|---|
| Hewlett Packard 401K Tactical Asset Allocation Moderate | 9% | 94% | 11% | 87% | 12% | 93% |
| Hewlett Packard 401K Strategic Asset Allocation Moderate | 15% | 201% | 5% | 26% | 6% | 36% |
| Five Core Asset ETF Benchmark Tactical Asset Allocation Moderate | 10% | 102% | 9% | 74% | 11% | 77% |
| Five Core Asset ETF Benchmark Strategic Asset Allocation Moderate | 16% | 154% | 4% | 17% | 7% | 27% |
Currently are doing well. But these asset classes are not available to Hewlett Packard 401K participants.
To summarize, investors adopting Hewlett Packard 401K plan can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles.
Symbols:HPQ, CASH, SPY, VTI, VEU, VWO, VNQ, BND, ICAEX, ARTIX, PHIYX, LZEMX, PRRIX, VPMCX, RNWFX, PIGLX, MIDJX, DODFX, DSFRX, FMAGX, FCNTX, FRESX, FLPSX, DODGX, PTRIX, PEBIX, PISIX, PIGIX, PFMIX, PTSHX, PFGCX, VEXMX, CRIMX
Exchange Tickers:
(HPQ),
(CASH),
(SPY),
(VTI),
(VEU),
(VWO),
(VNQ),
(BND),
(ICAEX),
(ARTIX),
(PHIYX),
(LZEMX),
(PRRIX),
(VPMCX),
(RNWFX),
(PIGLX),
(MIDJX),
(DODFX),
(DSFRX),
(FMAGX),
(FCNTX),
(FRESX),
(FLPSX),
(DODGX),
(PTRIX),
(PEBIX),
(PISIX),
(PIGIX),
(PFMIX),
(PTSHX),
(PFGCX),
(VEXMX),
(CRIMX)