07/22/2011

We have just released ETF based plan Amerivest Guided Portfolios Based ETF Plan that uses index ETFs to represent the asset classes suggested by the Amerivest balanced portfolio. Based on Amerivest, the model portfolios are suggested by Morningstars.

One can see the list of ETFs used in this plan from the Investment Options of the plan.

This plan investment choice is rated as average based on our plan rating methodology that measures the effectiveness of a plan's available investment funds. It has the following detailed ratings:

Diversification -- Rated as great (94%)
Fund Quality -- Rated as below average (26%)
Portfolio Building -- Rated as below average (23%)
Overall Rating -- Average (45%)

The performance has been reasonable.

Portfolio Performance Comparison

Both SAA and TAA portfolios beat the general S&P 500 (SPX) (VFINX) and the balanced portfolio index (VBINX) in the last 5 years.

See more detailed comparison from our comparison tool here. Users can change the parameters on that page to compare with other portfolios or funds.

See the SeekingAlpha article for some detailed description on this plan.

In general, this is a good plan that has very good diversification. Users can do more comparison and studies on this.

Symbols: BIV, SPX, BLV, BND, BSV, BWX, DBC, EMB, GWX, IWC, JNK, MBB, TIP, VBK, VBR, VEU, VNQ, VOE, VOT, VTI, VTV, VUG, VWO, Brokerage Plans

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05/05/2011

Small cap ETFs are generally made up of investments in companies with less than $1 billion in market capitalization. Small Cap Growth ETFs offer investors diversification throughout a wide range of industries and the potential for very high returns. At the same time, these ETFs tend to move up and down with the market and are subject to high levels of volatility.

US Small Cap Growth ETFs, represented by the iShares Russell 2000 Small Cap Growth Index ETF (IWO), continued to outperform other styles of US Equity Assets with a one week return of 2.66% and a trend score of 13.93%. The small cap growth sector has also outperformed other US Equity Assets over a 52 week period, returning 24.31% in the past year. (See Russell Table)

US Equity Style Return

4/29/2011

The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).

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04/20/2011

The incidents in Japan, the Middle East and even as far back as New Orleans teach us the danger of living on borrowed time, the reactors, the governments the levees keeping things going -- just one more year. The temptation to delay until next time is very seductive until disaster strikes and the cost to repair, dwarfs the cost to prevent. Many working people put off their retirement investing -- just one more year until it becomes a "hair on fire" problem -- which it now is for baby boomers for whom retirement is a near and present danger.

We continue to examine luminary portfolios to see what we can learn and use to further our investment portfolios.

Ted Aronson and his AJO Partners manage about $25 billion of institutional assets. Aronson puts his family's taxable money in this well-diversified portfolio of no-load index funds.

Fund	Weight	Ticker	ETF
US Equities	40%	VFINX, VEXMX, VISGX, VTSMX, VISXX	VTI, TMW, VBK, VBR
International Equity	20%	VPACX, VEURX	VEA
Emerging Markets	10%	VEIEX	EEM
US Bonds	30%	VIPSX, VUSTX, VWEHX	TIP, LQD, HYG

This is a well diversified four asset class portfolio with an aggressive profile. The US equities are broadly diversified. Asia Pacific is put above Europe for developed markets. There is a diversified set of fixed income with VWEHX and VUSTX being relatively high risk. The long term treasury bond has proved to be a good diversifier in recent history -- today all bonds are under pressure so this may be less true.

The US component is possibly over-weighted and emerging markets could be increased or, even better, some real estate assets could be added.

This portfolio was last reviewed at the end of the year and we now re-examine performance over the last three months as we see markets changing and inflation becoming more of a present reality.

This lazy portfolio will be compared with six asset class SIB to examine the returns of four and six asset class portfolios

Portfolio Performance Comparison

Portfolio/Fund Name	1Yr AR	1Yr Sharpe	3Yr AR	3Yr Sharpe	5Yr AR	5Yr Sharpe
Aronson Original	6%	74%	2%	14%	3%	16%
Six Core Asset ETF Benchmark Tactical Asset Allocation Moderate	10%	71%	9%	73%	13%	91%
Six Core Asset ETF Benchmark Strategic Asset Allocation Moderate	13%	103%	3%	20%	7%	35%

full comparison

The Aronson portfolio has four asset classes missing out on REIT and commodities. The performance over the last five years has not been exceptional with the Simple SIB able to beat it across the board.

Over the last three months, REIT and commodities have been in favor and having neither has had an impact on the Aronson returns.

Takeaways

• The Aronson lazy portfolio has moderate returns that can be beaten
• Having broader diversification pays off as market conditions change
• ETFs can readily be used to implement these portfolios with good performance
• A 10% spread over five years means that it’s worth looking at alternatives

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04/19/2011

The incidents in Japan, the Middle East and even as far back as New Orleans teach us the danger of living on borrowed time, the reactors, the governments the levees keeping things going -- just one more year. The temptation to delay until next time is very seductive until disaster strikes and the cost to repair, dwarfs the cost to prevent. Many working people put off their retirement investing -- just one more year until it becomes a "hair on fire" problem -- which it now is for baby boomers for whom retirement is a near and present danger.

We continue to examine luminary portfolios to see what we can learn and use to further our investment portfolios.

Ted Aronson and his AJO Partners manage about $25 billion of institutional assets. Aronson puts his family's taxable money in this well-diversified portfolio of no-load index funds.

Fund	Weight	Ticker	ETF
US Equities	40%	VFINX, VEXMX, VISGX, VTSMX, VISXX	VTI, TMW, VBK, VBR
International Equity	20%	VPACX, VEURX	VEA
Emerging Markets	10%	VEIEX	EEM
US Bonds	30%	VIPSX, VUSTX, VWEHX	TIP, LQD, HYG

This is a well diversified four asset class portfolio with an aggressive profile. The US equities are broadly diversified. Asia Pacific is put above Europe for developed markets. There is a diversified set of fixed income with VWEHX and VUSTX being relatively high risk. The long term treasury bond has proved to be a good diversifier in recent history -- today all bonds are under pressure so this may be less true.

The US component is possibly over-weighted and emerging markets could be increased or, even better, some real estate assets could be added.

This portfolio was last reviewed at the end of the year and we now re-examine performance over the last three months as we see markets changing and inflation becoming more of a present reality.

This lazy portfolio will be compared with six asset class SIB to examine the returns of four and six asset class portfolios

Portfolio Performance Comparison

Portfolio/Fund Name	1Yr AR	1Yr Sharpe	3Yr AR	3Yr Sharpe	5Yr AR	5Yr Sharpe
Aronson Original	6%	74%	2%	14%	3%	16%
Six Core Asset ETF Benchmark Tactical Asset Allocation Moderate	10%	71%	9%	73%	13%	91%
Six Core Asset ETF Benchmark Strategic Asset Allocation Moderate	13%	103%	3%	20%	7%	35%

full comparison

The Aronson portfolio has four asset classes missing out on REIT and commodities. The performance over the last five years has not been exceptional with the Simple SIB able to beat it across the board.

Over the last three months, REIT and commodities have been in favor and having neither has had an impact on the Aronson returns.

Takeaways

• The Aronson lazy portfolio has moderate returns that can be beaten
• Having broader diversification pays off as market conditions change
• ETFs can readily be used to implement these portfolios with good performance
• A 10% spread over five years means that it’s worth looking at alternatives

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04/18/2011

The incidents in Japan, the Middle East and even as far back as New Orleans teach us the danger of living on borrowed time, the reactors, the governments the levees keeping things going -- just one more year. The temptation to delay until next time is very seductive until disaster strikes and the cost to repair, dwarfs the cost to prevent. Many working people put off their retirement investing -- just one more year until it becomes a "hair on fire" problem -- which it now is for baby boomers for whom retirement is a near and present danger.

We continue to examine luminary portfolios to see what we can learn and use to further our investment portfolios.

Frank Armstrong, author of The Informed Investor, proposed this portfolio for an MSN Money article. The two key points of the portfolio are that it has four asset classes (US, International, REIT, Bonds) and relies on market indices rather than active management. The portfolio uses index funds because index funds eliminate manager risk. It overweights small-cap stocks as small-cap stocks have historically outperformed large caps stocks. The portfolio has a strong value tilt, based on the theory that, over the long haul, beaten-down stocks will perform better than high-flying growth stocks.

This should be a low cost, well performing portfolio.

The fund selection for testing the strategy is listed below with the ETF alternatives:

• 9.25% in Vanguard Small Cap Value VISVX (SCZ)
• 9.25% in Vanguard Value VIVAX (SPY, IYY)
• 6.25% in Vanguard Small-Cap Growth VISGX (VBK)
• 6.25% in Vanguard 500 Index VFINX (IVW)
• 31% in Vanguard Total International Stock VGTSX (EFA)
• 8% in Vanguard REIT VGSIX (IYR, VNQ, RWX)
• 30% in Vanguard Short-Term Bond VBISX (BND, AGG)

Things to note about the portfolio:

• This is designed as a lazy portfolio with limited rebalancing specified
• 31% in US equities is significant with a mix of large and small cap stocks
• With 70% in equities, this is a growth portfolio
• REIT is possibly underweighted
• There is no commodity asset class

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 6 asset SIB (Simpler Is Better) plan . This SIB plan has the following candidate index funds and their ETFs equivalent: US Equity: SPY or VTI
Commodity: DBC
Foreign Equity: EFA or VEU
REITs: IYR or VNQ or ICF
Emerging Market Equity: EEM or VWO
Fixed Income: AGG or BND

Portfolio Performance Comparison

A detailed comparison can be found here

Takeaways

• 2010 was a good year for lazy portfolios and as we continue through 2011while equities are still performing well, not having a commodities option hurts returns

• TAA has benefits in terms of being able to stay away from some area such as European equities

• Index funds continue to show good results against managed funds

• Larger asset class plans have the benefit of stability and good returns

Disclosure: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.  


Symbols: VISVX, SCZ, VIVAX, SPY, IYY, VISGX, VBK, VFINX, IVW, VGTSX, EFA, VGSIX, IYR, VNQ, RWX, BND, AGG, DBC, VEU, ICF, EEM, VWO

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04/06/2011

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12/03/2010

This report reviews Aflac Incorporated 401(k) Savings and Profit Sharing Plan 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 participants in Aflac Incorporated 401(k) Savings and Profit Sharing Plan can achieve reasonable investment results using asset allocation strategies.

Plan Review and Rating

AFLAC Inc (Ticker:AFL) has the "Aflac Incorporated 401(k) Savings and Profit Sharing Plan".

Aflac Incorporated 401(k) Savings and Profit Sharing Plan's 401K plan 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
Intermediate-term Bond: AGG, CIU, BIV, BND
Large Blend: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX
Large Growth: IVW, IWZ, JKE, VUG, ELG, QQQQ, RPG, SCHG
Large Value: IVE, IWW, JKF, VTV, ELV, PWV, RPV, SCHV
Mid-cap Growth: IJK, IWP, VOT, EMG, PWJ, RFG, UKW
Moderate Allocation: AOM
Small Growth: IJT, IWO, JKK, VBK, DSG, PWT, RZG, UKK

As of Dec 2, 2010, this plan investment choice is rated as 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 (35%)
Fund Quality -- Rated as (33%)
Portfolio Building -- Rated as (36%)
Overall Rating: (35%)

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 Aflac Incorporated 401(k) Savings and Profit Sharing Plan).

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 2, 2010)

Performance table (as of Dec 2, 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 Aflac Incorporated 401(k) Savings and Profit Sharing Plan participants.

To summarize, Aflac Incorporated 401(k) Savings and Profit Sharing Plan plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles.

Symbols: AFL , SPY , VTI , EFA , VEU , AGG , BND , AOM , CIU , BIV , GWL , PFA , IVE , IWW , JKF , VTV , ELV , PWV , RPV , SCHV , IVV , IYY , IWV , VV , DLN , RSP , SCHX , IVW , IWZ , JKE , VUG , ELG , QQQQ , RPG , SCHG , IJK , IWP , VOT , EMG , PWJ , RFG , UKW , IJT , IWO , JKK , VBK , DSG , PWT , RZG , UKK

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03/21/2011