 |
Vanguard ETF: |  |
7.4%* |
|
Diversified Core: | |
8.1%* |
|
Six Core Asset ETFs: | |
7.3%* |
Articles on DBE
- Schwab Mutual Funds Beat out ETFs
04/06/2011
l
Retirement investing is a "hair on fire" problem -- especially for baby boomers for whom retirement is a near and present danger. There is a real lack of consistent, unbiased information that a retiree can use to help improve risk adjusted returns. Blogger Jenny Hollingworth has been teaching herself about investing and has come to the point where she is going to choose a plan and make her first investments.
In her recent post New Steps she sorted through a list of alternatives and chose the Schwab OneSource Select List Funds.
The reason for her choice was:
- The highest possible rating for each plan is 5 stars. So I bypassed anything that didn’t have 5 (because really, why go for less?)
- Picked out a name I knew: Schwab. Specifically: Schwab OneSource Select List Funds. I selected it.
- This is an application to Charles Schwab's OneSource Select List mutual funds. These funds are No Load and No Transaction Fee (NTF) mutual funds. Based on Schwab's policy, the no load NTF funds have 90 days redemption fee period. As of 1/1/2010, there are total 140 OneSource Select List funds available from Schwab.
We are going to review the Schwab OneSource Select List Funds to see whether she chose a good plan. The plan consists of 137 funds. These funds enable participants to gain exposure to 6 major assets: US Equity, Commodity, Foreign Equity, REITs, Emerging Market Equity, Fixed Income.
Asset Class Ticker Name LARGE VALUE AAGPX American Beacon Lg Cap Value Inv Foreign Large Value AAIPX American Beacon Intl Equity Inv Retirement Income AANPX American Beacon Retire Inc & Apprec Inv High Yield Muni ABHYX American Century High-Yield Muni Inv Inflation-Protected Bond ACITX American Century Infl-Adj Bond Inv Muni National Long ACLVX American Century Long-Term Tax-Free Inv MID-CAP VALUE ACMVX American Century Mid Cap Value Inv Conservative Allocation AONIX American Century One Choice: Vry Cnsrv I MID-CAP VALUE ARDEX Aston/River Road Dividend All Cap Val N Target Date 2011-2015 ARFIX American Century LIVESTRONG 2015 Inv Retirement Income ARTOX American Century LIVESTRONG Inc Inv Target Date 2021-2025 ARWIX American Century LIVESTRONG 2025 Inv Target Date 2031-2035 ARYIX American Century LIVESTRONG 2035 Inv SMALL VALUE AVPAX American Beacon Small Cp Val Inv EUROPE STOCK AXEAX Threadneedle European Equity A Muni National Interm BMBSX Baird Intermediate Muni Bd Inv Technology BOGSX Black Oak Emerging Technology Small Growth BSCFX Baron Small Cap Moderate Allocation BUFBX Buffalo Balanced Technology BUFTX Buffalo Science & Technology DIVERSIFIED EMERGING MKTS CEMVX Causeway Emerging Markets Investor MID-CAP BLEND CHTTX Aston/Optimum Mid Cap N Intermediate Government CPTNX American Century Government Bond Inv Small Growth CSMVX Century Small Cap Select Inv REAL ESTATE CSRSX Cohen & Steers Realty Shares Long-Short CVSIX Calamos Market Neutral Income A SMALL BLEND DISSX Dreyfus Small Cap Stock Index Bank Loan EABLX Eaton Vance Floating Rate Adv Conservative Allocation EXDAX Manning & Napier Pro-Blend Cnsrv Term S Foreign Large Blend EXWAX Manning & Napier World Opportunities A Moderate Allocation FAGSX First American Strat Growth Allc A Financial FBRSX FBR Small Cap Financial ULTRASHORT BOND FEUGX Federated Adjustable Rate Secs Instl Intermediate Government FICMX Federated Income Instl Muni National Interm FIMTX Federated Intermediate Municipal Instl LARGE BLEND FMIHX FMI Large Cap Long-Short FMLSX Wasatch-1st Source Long/Short SHORT GOVERNMENT FSGVX Federated US Govt 1-3 Yr Instl Muni Short FSHIX Federated Shrt-Interm Dur Muni Instl Short-Term Bond FSTIX Federated Short-Term Income Instl Intermediate-Term Bond FTRFX Federated Total Return Bond Instl Svc SMALL BLEND GABSX Gabelli Small Cap Growth AAA Communications GABTX GAMCO Global Telecommunications AAA LARGE GROWTH HCAIX Harbor Capital Appreciation Inv Foreign Large Blend HIINX Harbor International Inv WORLD STOCK HLMGX Harding Loevner Global Equity Advisor Foreign Large Growth HLMNX Harding Loevner International Equity Inv Equity Energy ICENX ICON Energy S China Region ICHKX Guinness Atkinson China & Hong Kong LARGE VALUE INDZX RiverSource Diversified Equity Inc A Moderate Allocation JABAX Janus Balanced T Health JAGLX Janus Global Life Sciences T LARGE GROWTH JAMRX Janus Research T Small Growth JATTX Janus Triton T Foreign Large Blend JETAX Artio International Equity II A Target Date 2021-2025 JNSAX JPMorgan SmartRetirement 2025 A LARGE BLEND JRMSX INTECH Risk-Managed Core T Target Date 2011-2015 JSFAX JPMorgan SmartRetirement 2015 A Target Date 2026-2030 JSMAX JPMorgan SmartRetirement 2030 A Target Date 2016-2020 JTTAX JPMorgan SmartRetirement 2020 A LARGE BLEND JUEAX JPMorgan US Equity A LARGE VALUE JVLAX JHancock3 Disciplined Value A Small Growth KGSCX Kalmar Growth-with-Value Small Cap LARGE GROWTH LGILX Laudus Growth Investors US Large Cap Gr WORLD BOND LIFNX Laudus Mondrian Intl Fixed Income Foreign Large Blend LISOX Lazard Intl Strategic Equity Open Multisector Bond LSBRX Loomis Sayles Bond Retail DIVERSIFIED PACIFIC/ASIA MAPIX Matthews Asia Pacific Equity Income PACIFIC/ASIA EX-JAPAN STK MAPTX Matthews Pacific Tiger Investor China Region MCHFX Matthews China Investor Muni National Interm MITFX Marshall Intermediate Tax-Free Inv JAPAN STOCK MJFOX Matthews Japan Investor Foreign Large Blend MKIEX McKee International Equity Instl DIVERSIFIED PACIFIC/ASIA MPACX Matthews Asia Pacific Investor High Yield Bond MWHYX Metropolitan West High Yield Bond M Short-Term Bond MWLDX Metropolitan West Low Duration Bond M Intermediate-Term Bond MWTRX Metropolitan West Total Return Bond M MID-CAP BLEND NMMCX Northern Multi-Manager Mid Cap SMALL VALUE NOSGX Northern Small Cap Value Muni National Long NOTEX Northern Tax-Exempt Small Growth NSPAX ING Small Cap Opportunities A Foreign Small/Mid Value OAKEX Oakmark International Small Cap I WORLD STOCK OAKGX Oakmark Global I COMMODITIES BROAD BASKET PCRDX PIMCO Commodity Real Ret Strat D Emerging Markets Bond PEMDX PIMCO Emerging Markets Bond D LARGE BLEND PEOPX Dreyfus S&P 500 Index WORLD BOND PFODX PIMCO Foreign Bond (USD-Hedged) D Intermediate-Term Bond PGBOX JPMorgan Core Bond A Multisector Bond PONDX PIMCO Income D LARGE BLEND PRBLX Parnassus Equity Income - Inv Inflation-Protected Bond PRRDX PIMCO Real Return D SMALL VALUE PSOAX JPMorgan Small Cap Value A Intermediate-Term Bond PTTDX PIMCO Total Return D SMALL BLEND RYTFX Royce Total Return Svc Intermediate-Term Bond SAMIX RidgeWorth Intermediate Bond I Foreign Large Blend SICNX Schwab International Core Equity Inst Foreign Large Blend SIEIX RidgeWorth Intl Equity Index I ULTRASHORT BOND SIGVX RidgeWorth US Gov Sec Ultra-Short Bd I Target Date 2031-2035 SRJAX JPMorgan SmartRetirement 2035 A DIVERSIFIED EMERGING MKTS SSEMX SSgA Emerging Markets Instl High Yield Bond STHTX RidgeWorth High Income I Muni National Interm STTBX RidgeWorth Investment Grade T/E Bond I LARGE BLEND SWANX Schwab Core Equity Inv Global Real Estate SWASX Schwab Global Real Estate Select Target Date 2026-2030 SWDRX Schwab Target 2030 LARGE VALUE SWDSX Schwab Dividend Equity Financial SWFFX Schwab Financial Services Target Date 2011-2015 SWGRX Schwab Target 2015 Intermediate Government SWGSX Schwab GNMA Long-Short SWHEX Schwab Hedged Equity Health SWHFX Schwab Health Care Target Date 2021-2025 SWHRX Schwab Target 2025 Intermediate-Term Bond SWIIX Schwab Premier Income Instl Foreign Large Blend SWISX Schwab International Index Retirement Income SWKRX Schwab Monthly Income Enh Payout Retirement Income SWLRX Schwab Monthly Income Max Payout LARGE GROWTH SWLSX Schwab Large-Cap Growth Foreign Large Growth SWMIX Laudus International MarketMasters Sel Small Growth SWMSX Laudus Small-Cap MarketMasters Select Muni National Interm SWNTX Schwab Tax-Free Bond Moderate Allocation SWOBX Schwab Balanced Inv LARGE BLEND SWPPX Schwab S&P 500 Index SMALL BLEND SWSSX Schwab Small Cap Index LARGE GROWTH TGCNX TCW Select Equities N Mid-Cap Growth TGDNX TCW Growth Equities N EQUITY PRECIOUS METALS TGLDX Tocqueville Gold LARGE BLEND TICRX TIAA-CREF Social Choice Eq Retail LARGE GROWTH TIRTX TIAA-CREF Large-Cap Growth Retail LARGE GROWTH TWCGX American Century Growth Inv Muni National Interm TWTIX American Century Interm-T Tx-Fr Bd Inv SHORT GOVERNMENT TWUSX American Century Short-Term Govt Inv LARGE VALUE TWVLX American Century Value Inv Foreign Large Value TWWDX Thomas White International Foreign Large Growth UMBWX Scout International SMALL VALUE VSFAX Federated Clover Small Value A Mid-Cap Growth WTMGX Westcore MIDCO Growth LARGE VALUE YAFFX Yacktman Focused Asset Class Number of funds Balanced Fund 21 REITs 2 Fixed Income 34 Commodity 1 Sector Fund 9 Foreign Equity 18 Emerging Market Equity 7 US Equity 41 Other 4 Total 137
As of Apr 5, 2011, this plan investment choice is rated as above average based on MyPlanIQ Plan Rating methodology that was designed to measure how effective a plan's available investment funds are . It has the following detailed ratings:Diversification -- Rated as great (98%)
Fund Quality -- Rated as average (54%)
Portfolio Building -- Rated as great (86%)
Overall Rating: above average (80%)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 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
Performance chart (as of Apr 5, 2011)Performance table (as of Apr 5, 2011)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Schwab OneSource Select List Funds Tactical Asset Allocation Moderate 13% 106% 10% 91% 13% 110% Schwab OneSource Select List Funds Strategic Asset Allocation Moderate 12% 152% 4% 32% 7% 52% Six Core Asset ETF Benchmark Tactical Asset Allocation Moderate 10% 81% 9% 82% 13% 89% Six Core Asset ETF Benchmark Strategic Asset Allocation Moderate 14% 121% 4% 20% 7% 34% With six asset classes and a wide number of funds, the returns beat the six asset class benchmark. With high scores in all categories, this plan delivers portfolios that have produced strong historical returns.
Symbols: SPY, VTI, EFA, VEU, EEM, VWO, IYR, VNQ, ICF, AGG, BND, DBC, HYG, JNK, PHB, AOM, AOK, CIU, BIV, ITM, MUB, TFI, PZA, MLN, IYH, IXJ, VHT, XBI, PBE, DBR, RYH, EFG, IXP, PTE, DGG, LTL, MTK, PTF, DBT, RYT, ROM, GWL, PFA, IVE, IWW, JKF, VTV, ELV, PWV, RPV, SCHV, SCZ, EFV, PID, DWM, IYF, VFH, IPF, PFI, DRF, RYF, IFGL, RWX, TZE, TZG, TZI, TZO, TZL, IGOV, BWX, WIP, IVV, IYY, IWV, VV, DLN, RSP, SCHX, IOO, VT, SHY, SHV, VGSH, PLK, USY, IEV, VGK, PEF, DEB, IVW, IWZ, JKE, VUG, ELG, QQQQ, RPG, SCHG, IJJ, IWS, JKI, VOE, EMV, PWP, RFV, UVU, IJH, IWR, JKG, VO, MDY, EMM, PJG, DON, EZM, MVV, IJS, IWN, JKL, VBR, DSV, PWY, RZV, UVT, IJR, IWM, JKJ, VB, DSC, PJM, DES, SAA, UWM, SCHA, GMM, PXH, DEM, SCHE, GBF, LAG, PCY, CSJ, BSV, VCSH, ITE, IXC, IPW, DBE, RYE, DKA, IEI, VGIT, IJK, IWP, VOT, EMG, PWJ, RFG, UKW, IJT, IWO, JKK, VBK, DSG, PWT, RZG, UKK, TIP, DBP, EPP, VPL, GMF, PAF, AAXJ, DND, EWJ, JPP, PJO, DXJ, GSG, BIL
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.
Originally from the UK, Jenny Hollingworth lives with her husband and two sons in Northern California. She is a wife, mother, writer, theatre director, coffee drinker, avid reader, keen walker, movie watcher, Jane Austen lover and observer of life, in no particular order. MyPlanIQ has no formal relationship with Jenny Hollingworth.
- Schwab Select ETF Plan Has Bright Prospects
04/06/2011
Schwab ETF Plan Has Good Pedigree and Bright Prospects Retirement is now a "hair on fire" problem. There is much talk of working longer, downsizing, living on less. However, there is something you can do to help improve your risk adjusted returns. Look at your portfolios and plans to build a diversified portfolio with a systematic investment strategy.
This is not as hard as you might think -- to highlight this point, we feature a plan created by a non professional that matches up well with any of the other plans. Kevin Carr. is an individual investor who employs a long term strategy. He manages an individual common stock portfolio as well as many plans on MyPlan IQ. If you have any questions regarding this plan please contact him.
This plan provides you with Schwab's experts’ top picks of low-cost ETFs representing approximately 50 ETFs, based on rigorous criteria including expenses, tracking error, trading volume, and more. Schwab ETFs trade commission free. There are no redemption periods so you can start today and not worry about holding periods.We report on this Schwab ETF Select List which consists of 49 funds. These funds give exposure to 6 major assets: US Equity, Commodity, Foreign Equity, REITs, Emerging Market Equity, Fixed Income.
Asset Class Ticker Name LARGE BLEND SCHX Schwab U.S. Large-Cap ETF LARGE GROWTH SCHG Schwab U.S. Large-Cap Growth ETF LARGE VALUE SCHV Schwab U.S. Large-Cap Value ETF MID-CAP BLEND VO Vanguard Mid-Cap ETF Mid-Cap Growth VOT Vanguard Mid-Cap Growth ETF MID-CAP VALUE VOE Vanguard Mid-Cap Value ETF SMALL BLEND SCHA Schwab U.S. Small-Cap ETF Small Growth VBK Vanguard Small Cap Growth ETF SMALL VALUE VBR Vanguard Small Cap Value ETF LARGE BLEND SCHB Schwab U.S. Broad Market ETF LARGE VALUE VYM Vanguard High Dividend Yield Indx ETF Foreign Large Blend SCHF Schwab International Equity ETF Foreign Large Growth EFG iShares MSCI EAFE Growth Index Foreign Large Value EFV iShares MSCI EAFE Value Index FOREIGN SMALL/MID GROWTH SCHC Schwab International Small-Cap Eq ETF DIVERSIFIED EMERGING MKTS SCHE Schwab Emerging Markets Equity ETF Foreign Large Blend VEU Vanguard FTSE All-World ex-US ETF WORLD STOCK VT Vanguard Total World Stock Index ETF EUROPE STOCK VGK Vanguard European ETF DIVERSIFIED PACIFIC/ASIA VPL Vanguard Pacific Stock ETF JAPAN STOCK EWJ iShares MSCI Japan Index China Region GXC SPDR S&P China Intermediate-Term Bond BND Vanguard Total Bond Market ETF SHORT GOVERNMENT SCHO Schwab Short-Term U.S. Treasury ETF Intermediate Government SCHR Schwab Intermediate-Term U.S. Trsy ETF LONG GOVERNMENT TLH iShares Barclays 10-20 Year Treasury Bd Inflation-Protected Bond SCHP Schwab U.S. TIPS ETF Intermediate-Term Bond CIU iShares Barclays Intermediate Credit Bd High Yield Bond JNK SPDR Barclays Capital High Yield Bond WORLD BOND BWX SPDR Barclays Capital Intl Treasury Bond Muni National Long MUB iShares S&P National AMT-Free Muni Bd Consumer Discretionary XLY Consumer Discret Select Sector SPDR Consumer Staples XLP Consumer Staples Select Sector SPDR Equity Energy XLE Energy Select Sector SPDR Financial XLF Financial Select Sector SPDR Health XLV Health Care Select Sector SPDR Industrials XLI Industrial Select Sector SPDR Natural Resources XLB Materials Select Sector SPDR Technology XLK Technology Select Sector SPDR Communications IYZ iShares Dow Jones US Telecom Utilities XLU Utilities Select Sector SPDR COMMODITIES BROAD BASKET DBC PowerShares DB Commodity Index Tracking Commodities Agriculture DBA PowerShares DB Agriculture Commodities Precious Metals IAU iShares Gold Trust Commodities Industrial Metals DBB PowerShares DB Base Metals Commodities Energy USL United States 12 Month Oil MISCELLANEOUS SECTOR PFF iShares S&P U.S. Preferred Stock Index REAL ESTATE VNQ Vanguard REIT Index ETF Asset Class Number of funds Balanced Fund 0 REITs 1 Fixed Income 9 Commodity 5 Sector Fund 11 Foreign Equity 8 Emerging Market Equity 3 US Equity 11 Other 1 Total 49 Many are looking for access to a well rounded ETF plan through Schwab. This fills this hole and as Schwab makes more of their own funds available, it will be possible to move them into the plan. On this review, the only comment would be to add another REIT choice. The other asset classes have a good number of selections without being overwhelming.
As of Apr 4, 2011, this plan investment choice is rated as above average based on MyPlanIQ Plan Rating methodology that was designed to measure how effective a plan's available investment funds are . It has the following detailed ratings:
Diversification -- Rated as great (99%)
Fund Quality -- Rated as average (47%)
Portfolio Building -- Rated as average (56%)
Overall Rating: above average (66%)
Thehigh diversification score means that all the major and minor asset classes have been ticked. Fund quality is lower because some of the ETF's don't have a long history but that shouldn't impede the ability for the future.
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 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
Performance chart (as of Apr 4, 2011)Performance table (as of Apr 4, 2011)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Schwab ETF Select List Tactical Asset Allocation Moderate 9% 82% 8% 72% 12% 89% Schwab ETF Select List Strategic Asset Allocation Moderate 14% 118% 3% 15% 4% 20% Six Core Asset ETF Benchmark Tactical Asset Allocation Moderate 9% 81% 10% 82% 13% 89% Six Core Asset ETF Benchmark Strategic Asset Allocation Moderate 14% 121% 4% 20% 7% 34%
This portfolio performs well against the six asset ETF benchmark- SAA provides lower volatility while albeit delivering lower historical returns but as more of the newer funds are applied to the portfolio, there will be more opportunity for closing the gap
- The TAA portfolios run neck and neck over the five year period
In a future article, we will review performance over the last three months to see how the plan has performed in the light of recent events.
Kay Takeaways- Building a plan of funds is not the preserve of the few -- anybody who has the interest and application to research can provide well constructed plans
- It is possible to benefit from those individuals while still having transparency and not being captive to any particular broker
Symbols: SPY, VTI, EFA, VEU, EEM, VWO, IYR, VNQ, ICF, AGG, BND, DBC, HYG, JNK, PHB, CIU, BIV, MUB, TFI, PZA, MLN, GII, PUI, DBU, RYU, UPW, IYH, IXJ, VHT, XBI, PBE, DBR, RYH, EFG, IXP, PTE, DGG, LTL, IYM, IGE, VAW, XLB, XME, PYZ, DBN, RTM, UYM, MTK, PTF, DBT, RYT, ROM, GWL, PFA, IVE, IWW, JKF, VTV, ELV, PWV, RPV, SCHV, EFV, PID, DWM, IYF, VFH, IPF, PFI, DRF, RYF, KXI, VDC, PSL, DPN, RHS, RXI, VCR, IYJ, EXI, VIS, IGOV, BWX, WIP, IVV, IYY, IWV, VV, DLN, RSP, SCHX, IOO, VT, SHY, SHV, VGSH, PLK, USY, TLT, TLH, IEF, EDV, VGLT, TLO, PLW, IEV, VGK, PEF, DEB, IVW, IWZ, JKE, VUG, ELG, QQQQ, RPG, SCHG, IJJ, IWS, JKI, VOE, EMV, PWP, RFV, UVU, IJH, IWR, JKG, VO, MDY, EMM, PJG, DON, EZM, MVV, IFSM, VSS, SCHC, IJS, IWN, JKL, VBR, DSV, PWY, RZV, UVT, IJR, IWM, JKJ, VB, DSC, PJM, DES, SAA, UWM, SCHA, GMM, PXH, DEM, SCHE, ITE, IXC, IPW, DBE, RYE, DKA, IEI, VGIT, IJK, IWP, VOT, EMG, PWJ, RFG, UKW, IJT, IWO, JKK, VBK, DSG, PWT, RZG, UKK, TIP, EPP, VPL, GMF, PAF, EWJ, JPP, PJO, DXJ, GSG
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.
- Commodities Withstood the Recent Market Selloff
03/21/2011
Commodity ETFs again showed their divergence with other risk assets last week: during the market selloff last week. The broadbase commodity index like Powershares commodity index (DBC) actually registered a 0.78% gain. Natural gas (UNG) had a big jump, gaining 6.83% while gold (GLD) was steady. Silver had the biggest drop of 2.17%. Fore more detailed performance, please refer to here.
From the following trend score table, one can see the broadbase commodity index (DBC) actually had its trend score increased in last week.
The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).Assets Class Symbols 03/18
Trend
Score03/11
Trend
ScoreDirection Silver SLV 40.11% 47.09% v Energy DBE 16.53% 14.75% ^ Commodity DBC 14.15% 12.94% ^ Precious Metals DBP 14.15% 15.87% v Agriculture DBA 12.09% 14.21% v US Oil USO 10.34% 8.1% ^ Gold GLD 8.86% 9.46% v Base Metals DBB 6.53% 4.5% ^ Natural Gas UNG -5.95% -13.75% ^ Amid the somewhat severe and volatile market correction last week, it is relevant to review several commodity themes again here:
- Agriculture commodities (DBA): world food price has risen in the past several years and the demand from emerging middle classes outstripped the supply. See Commodities Trends: Food Prices Rose More Than Normal CPIs for more analysis.
- Precious metals (gold, silver) (DBP): governments around the globe pumped money to stimulate the economy, let alone the quantitative easing 1-2 by the U.S. central bank would surely make paper currencies less valuable and thus precious metals (Gold and Silver) become the defacto hard currencies. We also pointed out that Silver plays dual roles (as a proxy to hard currency and a proxy to general industrial activities being a metal of practical use).
- Energy (Oil (USO) or natural gas (UNG)) (DBE): Amid the middle east political unrests and recent Libyan's upheaval (Libya has the ninth largest oil reserve in the world), oil production is in danger of sudden disruption.
- Broadbase commodities (DBC) (GSG): Along with the mentioned factors, recent natural disaster in Japan, the third largest economy in the world, will only add more government supported stimulus, commodity hoarding will only get worse.
- Commodity Investing: Long/Short (S&P Commodity Trend Indicators) vs. Long-Only
- Commodity ETFs: Does Everyone Need Energy in Their Portfolio?
- Energy Commodities and Gold ETFs Are Strong: Gold's Role in Asset Allocation?
- Correction in Commodities: The Role of Volatile Commodities in Asset Allocation
- Gold and Silver Corrected, Agriculture Commodities Strong
Symbols: SLV,DBP,GLD,DBB,DBA,DBC,DBE,USO,UNG,SPY,QQQQ,IWM,MDY,EFA,VEU,EEM,VWO,IYR,ICF,VNQ,GSG,LQD,CSJ,CIU,HYG,JNK,PHB,TLT,IEF,SHY,SHV,BND,AGG,MUB,MBB ,
Exchange Symbols: (NASDAQ: SLV), (NASDAQ: DBP), (NASDAQ: GLD), (NASDAQ: DBB), (NASDAQ: DBA), (NASDAQ: DBC), (NASDAQ: DBE), (NASDAQ: USO), (NASDAQ: UNG), (NASDAQ: SPY), (NASDAQ: QQQQ), (NASDAQ: IWM), (NASDAQ: MDY), (NASDAQ: EFA), (NASDAQ: VEU), (NASDAQ: EEM), (NASDAQ: VWO), (NASDAQ: IYR), (NASDAQ: ICF), (NASDAQ: VNQ), (NASDAQ: GSG), (NASDAQ: LQD), (NASDAQ: CSJ), (NASDAQ: CIU), (NASDAQ: HYG), (NASDAQ: JNK), (NASDAQ: PHB), (NASDAQ: TLT), (NASDAQ: IEF), (NASDAQ: SHY), (NASDAQ: SHV), (NASDAQ: BND), (NASDAQ: AGG), (NASDAQ: MUB), (NASDAQ: MBB)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.
- Commodity Investing: Long Short (S&P Commodity Trend Indicators) vs. Long Only
03/13/2011
Last week's market volatility is a good reminder on how precarious it is in commodity investing. For the week, broadbase commodity index ETF (DBC) dropped 3.09% while Gold (GLD) fared better, dropping only 0.81%. Agriculture commodity (DBA) dropped even more: 3.71%. For more detailed information, please refer to here.
It is now generally recognized that adding commodity exposure in a long term portfolio that adopts a strategic asset allocation strategy can increase diversification effect and thus possibly improving risk adjusted returns. However, given the high volatitily (and risk) of commodities, it is important for an investor to understand the difference between a long only approach and long short approach in this asset investment.
A long only approach is simply just buying a commodity index such as Powershares DB Commodity Index ETF (DBC) or GSCI commodity index (GSG) (or sub index such as agriculture (DBA), precious metal (DBP)). A long short approach, on the other hand, can take long and/or short positions on mutliple commodity components simultaneously. It is mostly based on technical indicators such as moving averages, momentums and reversals. This approach has been adopted by professional CTAs (Commodity Trading Advisors). A simple and popular strategy is the S&P Diversified Commodity Trend Indicators. The following is a short description of the strategy:
The strategy is a simplified variation of S&P commodity trends indicator (CTI). It is a subset of the S&P DTI by simply eliminating half of the financial assets.1.The original asset allocation
Energy 37.5%
Powershares DB Energy (DBE)
Industrial metal 10%
Powershares DB Base Metal (DBB)
Precious metal 10.5%
Powershares DB Precious Metal (DBP)
Agriculture 42%
Powershares DB Agriculture (DBA)
2. Position determination
The monthly percentage change of a sector’s price is compared to past monthly price changes exponentially weighted to give greatest weight to the most recent return and least weight to the return seven months prior.
The weights are as follows:
NUMBER OF MONTHS
WEIGHT
7
2.32%
6
3.71%
5
5.94%
4
9.51%
3
15.22%
2
24.34%
1
38.95%
3. Monthly rebalancing
The portfolio is rebalanced monthly by setting every sector to their original percentage and do the position determination again.
For more information, please refer to "Standard and Poor's Commodity Trend Indicator" document.The following table compares the performance between such S&P Commodity Trend Indicators Portfolio (S&PCTI) and a general broadbase commodity ETF (DBC):
Portfolio
Last 3 Years
Last 1 Years
2007
2008
2009
2010
2011
AR(%)
S&PCTI
5.049
14.884
15.939
23.768
2.282
3.186
5.148
AR(%)
DBC
-8.826
25.383
31.579
-31.799
16.187
10.154
7.695
Sharpe Ratio(%)
S&PCTI
29.127
113.142
91.832
107.569
14.048
23.723
39.12
Sharpe Ratio(%)
DBC
-20.516
150.174
160.984
-97.51
58.736
52.501
415.108
Standard Deviation(%)
S&PCTI
16.389
13.074
16.719
21.232
15.572
13.045
13.119
Standard Deviation(%)
DBC
27.914
18.435
17.728
34.962
27.397
19.578
15.275
Though S&PCTI under performed in 2009, 2010 and 2011, it out performed DBC in the last 3 years. This is because it had 23.8% return in 2008, compared with DBC's 31.6% loss in the same year. Furthermore, S&PCTI has a standard deviation 16%, compared with DBC's 28%. In fact, S&PCTI's standard deviation is consistent with that of an overall stock market index such as S&P 500 (SPY).
It is perhaps even more important to pay attention to maximum drawdowns for S&PCTI: since its inception 10/1/2007 (this is due to the short histories of commodity ETFs used in this portfolio), the maximum drawdown is about 19% vs. DBC's whopping 60% (during the 2008-2009 detacle).
The takeaway from this article is that for active investors, one might want to consider adopting a more conservative approach in commodity exposures. Investors can find Element's ETN (LSC) or Direxion's Commodity Trend Strategy Inv (DXCTX) that implement the S&P Commodity Trend Indicators strategy. Before you invest, however, you are encouraged to compare the portfolio S&PCTI, LSC and DXCTX.In the follow up articles, we wil further compare how the long only and long short strategies can be used in strategic and tactical asset allocation portfolios.
Symbols:SLV,DBP,GLD,DBB,DBA,DBC,DBE,USO,UNG,SPY,
Symbols (exchange): (NYSE:SLV), (NYSE:DBP), (NYSE:GLD), (NYSE:DBB), (NYSE:DBA), (NYSE:DBC), (NYSE:DBE), (NYSE:USO), (NYSE:UNG), (NYSE:SPY)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 - Commodity ETFs: Does Everyone Need Energy Investment?
03/07/2011
Last week is another strong week that saw strong ascent of commodity ETFs across the board (other than natural gas ETF (UNG)). US Oil (USO) and Silver (SLV) shot up more than 6% while broadbase commodity ETF (DBC) gained 2.56%. For more detailed performance, see here.
The unrest in middle east drove oil prices higher again: WTI crude oil reached $104 per barrel. According to an article by Jason Zweig on The Wall Street Journal, $1.4 billion new money was poured into energy related investments in just one week ended on last Wednesday. Speculation is abound.
A broadbase commodity index ETF usually has adquate energy related exposure. For example, Powershares DB Commodity Index (DBC) has the following weights:Commodity Contract Expiry Date Index Weight Base Weight Aluminium 9/21/2011 3.90% 4.17% Brent Crude 2/14/2012 13.52% 12.38% Copper - Grade A 3/21/2012 4.24% 4.17% Corn 12/14/2011 5.47% 5.63% Gold 8/29/2011 7.03% 8.00% Heating Oil 5/31/2011 13.70% 12.38% Light Crude 6/21/2011 12.54% 12.38% Natural Gas 9/28/2011 4.40% 5.50% RBOB Gasoline 11/30/2011 13.47% 12.38% Silver 12/28/2011 2.16% 2.00% Soybeans 11/14/2011 5.51% 5.63% Sugar #11 6/30/2011 5.23% 5.63% Wheat 7/14/2011 5.17% 5.63% Zinc 5/18/2011 3.65% 4.17% Energy exposure in DBC amounts to 57.63% as of 3/3/2011!
In the article, Zweig questioned whether one needs to have energy stocks, especially energy company stocks made up 13% of S&P 500 index. We concur with him that investors should be cautious in the face of such a speculative rush. On the other hand, a portfolio that has commodity exposure can be more diversified and thus, reducing risk and enhancing return in general. This is not necessarily always the case. The following table compares the performance of a portfolio with 5 core assets: US Equities (VTI), Foreign Equities (VEU), Emerging Market Equities (VWO), REITs (VNQ) and Total Bond Index (BND) and a portfolio with an extra asset (DBC).Portfolio Performance Comparison
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Five Core Asset Index ETF Funds Strategic Asset Allocation Moderate 16% 127% 6% 27% 8% 33% Six Core Asset ETFs Strategic Asset Allocation Moderate 16% 131% 5% 22% 7% 35%
The portfolio with the additional commodity asset slightly under performed. On the other hand, if one adopts a tactical asset allocation strategy, adding the commodity asset will improve the performance and Sharpe ratio:
The following table illustrates the trend score among commodity ETFs.Portfolio Performance Comparison
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Six Core Asset ETFs Tactical Asset Allocation Moderate 15% 110% 11% 83% 15% 102% Five Core Asset Index ETF Funds Tactical Asset Allocation Moderate 11% 80% 10% 81% 13% 85%
Assets Class Symbols 03/04
Trend
Score02/25
Trend
ScoreDirection Silver SLV 46.52% 44.61% ^ Agriculture DBA 18.61% 18.17% ^ Energy DBE 17.6% 17.3% ^ Commodity DBC 16.8% 16.74% ^ Precious Metals DBP 15.95% 15.56% ^ US Oil USO 12.94% 9.09% ^ Base Metals DBB 10.0% 13.17% v Gold GLD 9.66% 9.84% v Natural Gas UNG -19.04% -13.96% v The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).
The takeaway is that one can gain energy exposure by investing in broadbase commodity ETF. Investing in a broadbase commodity does not automatically guarantee performance and risk improvement. One has to adopt a tactical (or dynamic) approach to achieve such a goal.Symbols:SLV,DBP,GLD,DBB,DBA,DBC,DBE,USO,UNG,VTI,VEU,VNQ,VWO,BND,AGG,SPY,EFA,EEM,IYR,
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.
- Energy Commodities and Gold Strong: Gold's Role in Asset Allocation
02/26/2011
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02/20/2011
- Beware of Divergence Among Energy Commodity ETFs
02/14/2011
- Commodity Trends: 2010 Year End Review
01/03/2011
- Silver and Gold Continued to Shine While Other Commodities Largely Stable
12/19/2010
- Broad Based Commodities Strong, Precious Metals Continue Correction
12/11/2010
- Vanguard VA Has Some Rules and Can Be Cloned with an ETF Portfolio
12/08/2010
- As Gold/Precious Metals Correct, Agriculture Commodities Stay Strong
12/03/2010
- ETF Cloning of the Schwab VA
11/30/2010
- Commodities Nov 29
11/30/2010
- Commodities Mixed -- Some up, Some down
11/23/2010
- Commodity ETFs Show Muted Downturn This Week
11/20/2010
- Commodity Indicators for Week of November 15th
11/17/2010
- Top Tier ETF Broker Playoffs II
10/26/2010
- Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan Report On 12/03/2010
12/03/2010
This report reviews Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account 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 Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan can achieve reasonable investment results using asset allocation strategies.
Plan Review and Rating
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Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan's 401K plan consists of 55 funds. These funds enable participants to gain exposure to 5 major assets: US Equity, Foreign Equity, Commodity, Emerging Market Equity, Fixed Income. The list of minor asset classes covered:
Commodities Broad Basket: GSG, DBC
Conservative Allocation: AOK
Diversified Emerging Mkts: EEM, GMM, PXH, DEM, SCHE
Diversified Pacific/asia: EPP, VPL, GMF, PAF
Equity Energy: ITE, IXC, IPW, DBE, RYE, DKA
Europe Stock: IEV, VGK, PEF, DEB
Foreign Large Blend: EFA, VEU, GWL, PFA
Foreign Small/mid Growth: IFSM, VSS, SCHC
Health: IYH, IXJ, VHT, XBI, PBE, DBR, RYH
Inflation-protected Bond: TIP
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
Latin America Stock: ILF, GML
Long Government: TLT, TLH, IEF, EDV, VGLT, TLO, PLW
Mid-cap Value: IJJ, IWS, JKI, VOE, EMV, PWP, RFV, UVU
Multisector Bond: AGG, GBF, BND, LAG
Natural Resources: IYM, IGE, VAW, XLB, XME, PYZ, DBN, RTM, UYM
Pacific/asia Ex-japan Stk: EPP, AAXJ, GMF, PAF, DND
Short Government: SHY, SHV, VGSH, PLK, USY
Short-term Bond: CSJ, BSV, VCSH
Small Growth: IJT, IWO, JKK, VBK, DSG, PWT, RZG, UKK
Technology: MTK, PTF, DBT, RYT, ROM
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 (91%)
Fund Quality -- Rated as (48%)
Portfolio Building -- Rated as (84%)
Overall Rating: (75%)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 Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account 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 4 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)
Emerging Market Equity: (EEM or VWO)
Fixed Income: (AGG or BND)
Performance chart (as of Dec 2, 2010)Performance table (as of Dec 2, 2010)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan Tactical Asset Allocation Moderate 6% 44% 7% 51% 16% 109% Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan Strategic Asset Allocation Moderate 12% 119% 3% 21% 9% 61% Four Core Asset ETF Index Funds Emerging Markets Tactical Asset Allocation Moderate 1% 6% 6% 49% 12% 78% Four Core Asset ETF Index Funds Emerging Markets Strategic Asset Allocation Moderate 10% 75% 2% 6% 7% 31% Currently, asset classes in Foreign Equity (EFA,VEU), Emerging Market Equity (EEM,VWO) and Fixed Income (AGG,BND) are doing relatively well. These asset classes are available to Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan participants.
To summarize, Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles.
Symbols: ATI , SPY , VTI , EFA , VEU , EEM , VWO , AGG , BND , DBC , AOK , CIU , BIV , IYH , IXJ , VHT , XBI , PBE , DBR , RYH , IYM , IGE , VAW , XLB , XME , PYZ , DBN , RTM , UYM , MTK , PTF , DBT , RYT , ROM , GWL , PFA , IVE , IWW , JKF , VTV , ELV , PWV , RPV , SCHV , IVV , IYY , IWV , VV , DLN , RSP , SCHX , SHY , SHV , VGSH , PLK , USY , TLT , TLH , IEF , EDV , VGLT , TLO , PLW , IEV , VGK , PEF , DEB , IVW , IWZ , JKE , VUG , ELG , QQQQ , RPG , SCHG , IJJ , IWS , JKI , VOE , EMV , PWP , RFV , UVU , IFSM , VSS , SCHC , GMM , PXH , DEM , SCHE , GBF , LAG , CSJ , BSV , VCSH , ITE , IXC , IPW , DBE , RYE , DKA , ILF , GML , IJT , IWO , JKK , VBK , DSG , PWT , RZG , UKK , TIP , EPP , VPL , GMF , PAF , AAXJ , DND , GSG
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