VA--PartII
11/06/2010 0 comments
Charles Schwab's Income Choice Variable Annuity is a flexible premium deferred annuity contract (“Contract”) which allows you to accumulate assets on a tax-deferred basis for retirement or other long-term purposes.
Schwab Select Annuity's plan consists of 58 funds. These funds enable participants to gain exposure to 5 major assets: US Equity, Foreign Equity, REITs, Emerging Market Equity, Fixed Income.
IMPORTANT NOTE: because MyPlanIQ does not have Fidelity VIP fund data, all of these funds are substituted by their Fidelity Advisor equivalents. We believe the Fidelity Advisor funds should closely track their VIP fund correspondents.
| Asset Class | Schwab Select Annuity |
| U.S. Equity Excluding Company Stock | 43 |
| International Equity | 4 |
| Emerging Markets | 2 |
| Real Estate Trusts | 1 |
| Fixed Income Including Money Market | 6 |
| Sector Funds | 2 |
The funds are heavily weighted towards US equities but backed up with strong choices in fixed income and funds available in three other classes. It would be slightly improved with more choices in emerging markets and real estate trusts.
| Plan Rating Attribute | Schwab Select Annuity |
| Diversification | 90% |
| Fund Quality | 70% |
| Portfolio Building | 96% |
| Overall Rating | 86% |
This is a very good rating and the portfolio should perform well.
Merrill Lynch IRA Annuity plan consists of 39 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:
| Asset Class | Merrill Lynch IRA Annuity |
| U.S. Equity Excluding Company Stock | 31 |
| International Equity | 4 |
| Fixed Income Including Money Market | 4 |
The funds are heavily weighted towards US equities but backed up with some choices in fixed income and international equity classes. It would be improved with more asset classes such as emerging markets and real estate trusts.
| Plan Rating Attribute | Merrill Lynch IRA Annuity |
| Diversification | 19% |
| Fund Quality | 52% |
| Portfolio Building | 26% |
| Overall Rating | 32% |
With the heavy balance to US equities, the diversification is poor -- it is likely to be difficult to pick the best funds in the US class and there should be more in the other classes.
Performance chart (as of Nov 4, 2010)
Performance table (as of Nov 4, 2010)
| Portfolio Name | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
|---|---|---|---|---|---|---|
| Schwab Select Annuity Tactical Asset Allocation Moderate | 23% | 172% | 10% | 88% | 16% | 126% |
| Schwab Select Annuity Strategic Asset Allocation Moderate | 19% | 180% | 4% | 21% | 8% | 48% |
| MERRILL LYNCH IRA ANNUITY Tactical Asset Allocation Moderate | 7% | 62% | 3% | 27% | 8% | 68% |
| MERRILL LYNCH IRA ANNUITY Strategic Asset Allocation Moderate | 14% | 124% | 1% | 4% | 6% | 38% |
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 Nov 2, 2010)
Performance table (as of Nov 2, 2010)
| Portfolio Name | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
|---|---|---|---|---|---|---|
| Schwab Select Annuity Tactical Asset Allocation Moderate | 22% | 162% | 10% | 82% | 15% | 122% |
| Schwab Select Annuity Optimized Asset Allocation Moderate | 9% | 118% | 6% | 63% | 13% | 107% |
| Schwab Select Annuity Strategic Asset Allocation Moderate | 17% | 169% | 3% | 18% | 7% | 45% |
| Five Core Asset Index ETF Funds Tactical Asset Allocation Moderate | 16% | 108% | 7% | 47% | 15% | 103% |
| Five Core Asset Index ETF Funds Strategic Asset Allocation Moderate | 19% | 146% | 3% | 12% | 9% | 40% |
Not surprisingly, the Schwab funds beat the five core SIB -- with broad diversification, high quality funds and the ability to put together a solid portfolio, the annuity has strong returns potential.
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