CVS CareMark Retirement Plan: Good Funds But Can Improve Fund Qualities

12/06/2010 Share 0 comments

This report reviews CVS CAREMARK CORPORATION AND AFFILIATED COMPANIES . 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 participants in CVS CAREMARK CORPORATION AND AFFILIATED COMPANIES can achieve reasonable investment results using asset allocation strategies.

Plan Review and Rating

CVS CAREMARK CORPORATION AND AFFILIATED COMPANIES consists of 11 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:

Foreign Large Blend: EFA, VEU, GWL, PFA
Foreign Large Value: EFV, PID, DWM
Intermediate-term Bond: AGG, CIU, BIV, BND
Large Blend: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX
Mid-cap Blend: IJH, IWR, JKG, VO, MDY, EMM, PJG, DON, EZM, MVV
Small Blend: IJR, IWM, JKJ, VB, DSC, PJM, DES, SAA, UWM, SCHA
Small Growth: IJT, IWO, JKK, VBK, DSG, PWT, RZG, UKK
Us Equity: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX
World Stock: IOO, VT

As of Dec 3, 2010, 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 below average (21%)
Fund Quality -- Rated as above average (69%)
Portfolio Building -- Rated as above average (69%)
Overall Rating: average (55%)

Current Economic and Market Conditions

We have experienced an uncertain 2010: plenty of worries on whether the US economy will climb out of the great recession and recover.

• The Federal Reserve embarked on Quantitative Easing II (QE2) to stimulate the economy.
• The housing market is still at its low but largely stabilized.
• The unemployment rate is stuck at 9%.

Americans continue to face an uncertain future, given (among others) the high unemployment rate, large federal and local government debts and global trade imbalance. With such an economic backdrop, the stock and debt markets are going to be volatile. Despite this, markets have been resilient and appear positioned to rebound.

In this market it is even more critical to properly diversify and respond market changes. MyPlanIQ offers two asset allocation strategies: strategic and tactical asset allocation strategies ( SAA and TAA for participants in CVS CAREMARK CORPORATION AND AFFILIATED COMPANIES).

Strategic Asset Allocation is based on well known modern portfolio theory and its key features include: diversification, proper fund selection and periodically re-balancing.

Tactical Asset Allocation works on a diversified array of assets provided by funds in a plan and adjusts asset mixes based on market conditions such as asset price momentum utilized by TAA.

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 3 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)
Fixed Income: (AGG or BND)

Performance chart (as of Dec 3, 2010)

Performance table (as of Dec 3, 2010)

Currently, asset classes in US Equity (SPY,VTI), Foreign Equity (EFA,VEU) and Fixed Income (AGG,BND) are doing relatively well. These asset classes are available to CVS CAREMARK CORPORATION AND AFFILIATED COMPANIES participants.

To summarize, CVS CAREMARK CORPORATION AND AFFILIATED COMPANIES plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles.

labels:investment,

Symbols:CVS,SPY,VTI,EFA,VEU,AGG,BND,IVV,IYY,IWV,VV,DLN,RSP,SCHX,CIU,BIV,GWL,PFA,EFV,PID,DWM,IOO,VT,IJH,IWR,JKG,VO,MDY,EMM,PJG,DON,EZM,MVV,IJR,IWM,JKJ,VB,DSC,PJM,DES,SAA,UWM,SCHA,IJT,IWO,JKK,VBK,DSG,PWT,RZG,UKK, ,