TD Ameritrade Commission Free ETF’s Empowers Both Strategic and Tactical Asset Allocation
10/19/2010 0 comments
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.
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Category
|
Jan-08
|
Jan-09
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Jan-10
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Apr-10
|
Jul-10
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Oct-10
|
|
US Equities
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IWN
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VUG, MGK
|
IWN
|
VIG
|
IWS
|
VO
|
|
International Equities
|
EWJ
|
EWG
|
EWJ
|
EWA
|
AAXJ
|
AAXJ
|
|
Emerging Markets
|
EWZ
|
EWZ
|
EWZ
|
ILF
|
VWO
|
VWO
|
|
Real Estate
|
VNQ
|
VNQ
|
VNQ
|
VNQ
|
VNQ
|
VNQ
|
|
Commodities
|
DBC
|
DBC
|
DBC
|
DBC
|
DBC
|
DBC
|
|
Balanced Fund
|
AOK
|
|
AOK
|
AOK
|
AOK
|
AOK
|
|
Fixed Income
|
SHY, WIP, JNK
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SHM, BWX
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SHY, WIP, JNK
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VCSH, BWX, JNK
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CASH, AGG, JNK
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CASH, AGG, JNK
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This can be compared with a Six asset SIB for which there is just one fund in each asset class.
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Portfolio Name
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1Yr AR
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1Yr Sharpe
|
3Yr AR
|
3Yr Sharpe
|
5Yr AR
|
5Yr Sharpe
|
|
13%
|
87%
|
13%
|
86%
|
20%
|
128%
|
|
|
10%
|
83%
|
-1%
|
-6%
|
9%
|
46%
|
|
|
11%
|
93%
|
1%
|
5%
|
8%
|
40%
|
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,
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