PlanRatingIQ Rates Effectiveness of Plan Investment Choices

08/17/2010 1 comments

MyPlanIQ recently released Plan Investment Choices PlanRatingIQ to help gauge quality of investment choices provided in vast retirement IRA, 401K, 403B, 457 plans, variable annuities, variable universal life and college savings 529 plans. Unlike other services, PlanRatingIQ looks at it from the participant’s viewpoint – what returns they could achieve with the plan.

This is a significant step forward in order to help many participants evaluate various plans so as to better position and manage their investment portfolios. Returns is what they care about. Good returns are derived from minimizing the various fees charged and ensuring high quality investment choices.

MyPlanIQ Plan Investment Choices PlanRatingIQ uses the following rigorous methodology:

Step 1: Evaluate investment fund menu in the following three key categories and derive relative scores in each category:

  1. Fund Quality: MyPlanIQ uses fund risk adjusted returns to derive a score for each fund available and derive a combined score in this category.
  2. Diversification: MyPlanIQ measures how the available funds represent major asset classes including the following: U.S. Equity, International Equity, Emerging Market Equity, Real Estate Investment Trusts (REIT, both U.S. and International), Commodities, Fixed Income (both U.S. and International). In addition, minor asset classes such as high yield bonds, various maturity treasury bonds and  large/mid/small cap stocks are measured.
  3. Portfolio building: In addition to the above two categories, it has been found that correlation of funds in various market conditions plays a critical role in portfolio return and risk. For example, a stock fund that invests mainly in high quality large cap stocks may behave differently from a stock fund that invests in volatile low quality small cap stocks in a bear market or a rising bull market. In addition to asset classes diversification, such correlation can affect a portfolio performance in a meaningful way. Extensive simulation using MyPlanIQ portfolio simulation capability is performed to derive a relative score in this category.

Step 2: Combine the scores in these three categories to arrive an overall rating score by assigning proper weights to scores in the categories.

PlanRatingIQ adds a critical component to today’s mostly fee and policy based 401K plan ratings such as BrightScope’s 401K rating: for plan participants, the most important factor, after all fee and company benefit considerations, is how to derive most investment returns out of a given investment menu in a plan. It helps plan participants and investors alike to evaluate and improve investment funds selected by a provider. Combined with MyPlanIQ’s investment model portfolios based on time proven asset allocation strategies, investors now have a suite of tools to manage their day to day investments.

The following are some applications of PlanRatingIQ for plan participants:

  • Evaluate a plan’s investment menu design among many 401K plans they have had for various jobs held. This will help them to decide whether to rollover an existing 401K plan to a new 401K plan of a company currently they have a job at.
  • Evaluate whether it is worth to roll over from an existing 401K or IRA to another IRA in a brokerage.
  • Help investors to choose the best plans among available plans: this is especially true for many ETF based IRA/taxable brokerage plans MyPlanIQ supports. Those ETF plans are either MyPlanIQ SIB (Simpler Is Better) plans or lazy portfolio based plans proposed by investment gurus.
  • Evaluate multiple plan choices an organization sometimes provides. This is especially true for a non-profit organization such as a public employer (ex. state universities or city/county governments).
  • Many times, investors are presented by brokers with various variable annuities. Investors had to rely on their intuition and experience to evaluate these plans and sometimes made random choices. Now, investors can utilize PlanRatingIQ to evaluate and choose a variable annuity with better investment choices.
  • Evaluate and compare how a company’s plan performs among its peers in a same industry, region or even national wide.

For plan providers, PlanRatingIQ helps to evaluate an existing plan investment choices and further improve the design of a plan.

As of today, among thousands plans in MyPlanIQ database, the following are the top 20 plans based on PlanRatingIQ.

Plan Name TAA 5Yr Return SAA 5Yr Return Diversification Fund Quality Portfolio Construction Overall Rating
WACHOVIA SAVINGS PLAN 14% 6% 95% 82% 98% 92%
Schwab OneSource Select List Funds 17% 9% 98% 79% 97% 92%
Ampac Fine Chemicals LLC Bargaining Unit 401(k) Plan 15% 7% 93% 80% 100% 92%
MONSTER WORLDWIDE, INC. 401(k) SAVINGS PLAN 12% 7% 87% 89% 97% 92%
TD Ameritrade Premier List No Transaction Fee Mutual Fund Plan 13% 6% 98% 88% 85% 90%
COMPUWARE CORPORATION ESOP/401(k) PLAN 14% 6% 89% 74% 99% 88%
WESTERN DIGITAL CORPORATION 401(k) PLAN 10% 5% 74% 92% 92% 87%
Polaris Electronics Inc 401K Plan 14% 6% 62% 99% 96% 86%
Polaris Electronics Inc. 401K Plan 14% 6% 62% 99% 95% 86%
EMC Corporation 401(k) Savings Plan 12% 6% 85% 71% 98% 86%
TELLABS 401(k) PLAN 14% 8% 60% 98% 97% 86%
Societe Generale Employee Plan by Putnam Investments 11% 5% 77% 75% 100% 85%
PS 401(k) PROFIT SHARING PLAN 12% 5% 70% 90% 92% 85%
Franklin Templeton Profit Sharing 401(k) Plan 11% 6% 89% 81% 84% 85%
Schwab Select Annuity 14% 6% 90% 67% 93% 84%

The following is the list of ETF plans ranking.

Plan Name TAA 5 Yr Return Annualized Overall Rating
Vanguard ETFs 15% 59%
Six Core Asset ETFs 15% 54%
Liquid ETF Plan 12% 52%
iShares ETFs 10% 49%
Six Core Asset ETFs Most Popular 11% 47%
Fidelity Commission Efficient ETFs 9% 46%
Schwab Commission Efficient ETFs Including iShares 9% 45%
Diversified Major Asset ETFs Goldman Sachs Global Tactical Asset Allocation 4% 43%
David Swensen Six ETF Asset Individual Investor Plan 11% 42%
Five Core Asset Fixed Income Treasury Most Popular ETF Index Funds 11% 36%
ShareBuilder 401K ETFs 10% 32%
Five Core Asset Index ETF Funds 14% 32%
Fidelity 25 Commission Free ETFs 9% 27%
FolioInvesting Basic Allocation Folios ETF Plan NA 26%
Five Core Asset Most Popular ETF Index Funds 10% 25%
CNBC Model ETF Diversified Global Core Portfolio NA 25%
FundAdvice Ultimate Buy and Hold Lazy Portfolio ETFs 9% 25%
Four Core Asset ETF Index Funds Emerging Markets 12% 23%
Four Core Asset Most Popular ETF Index Funds Emerging Markets 10% 19%


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