 |
Vanguard ETF: |  |
7.4%* |
|
Diversified Core: | |
8.1%* |
|
Six Core Asset ETFs: | |
7.3%* |
Articles on SPX
- BBC’s Eurozone Debt Web
11/18/2011
The arrows point from the debtor to the creditor and are proportional to the money owed as of the end of June 2011.
Visit the original page for the interactive charts
- 401K Investments: 6 Myths Debunked
11/17/2011
Brian Graff, Executive Director for ASPPA (American Society of Pension Professional and Actuaries) debunked 6 myths regarding to 401K retirement plans:
Myth 1 – tax deductions for employer contributions and pre-tax deferrals by employees in 401(k) plans are lost revenue for the government. Short term government revenue can be boosted by reducing the tax deductions with the expense of losing long term revenue while creating more liabilities for government.
Myth 2 – less than 50% of American workers are covered by retirement plans. In March 2011 the results of the National Compensation Survey conducted by the Bureau of Labor showed that 73% of full time American workers have access to a retirement plan and of that amount 80% of them use their plans.
Myth 3 – only the wealthy benefit from retirement plans. Not true, 74% of participants in defined contribution retirement plans (such as 401(k) plans) have family incomes below $100,000 a year. Thirty eight percent of participants earn less than $50,000 a year.
Myth 4 – 401(k) plans are inadequate. However, tabulations based on the EBRI/ICI 401(k) Accumulation Projection model show the replacement ratio for 401(k) plans and Social Security combined is over 100% for the lowest income quartile, and well over 80% other income quartiles.
Myth 5 – cuts to limits on retirement plans will only impact the wealthy.
Myth 6 – workers will save for retirement without a workplace retirement plan.
Read the original article.
Symbols: 401K Investments, Retirement, SPX, COMP
- 3 Lessons from the Demise of Legg Mason's Bill Miller
11/17/2011
Bill Miller to Step Down From Legg Mason Value Trust, reported by AdvisorOne.com. Since the great financial crisis in 2008, there have been numerous high profile managers' failures including Fairholme's Bruce Berkowitz (FAIRX). While we can put blame on these individuals, what one should always remember is that all humans are subject to failures, regardless how great they are. By the way, this is also applicable to ourselves and various great committees (recently, Morningstar started to release its new 'forward looking' rating system that is decided by committees, we'll have more on this later). So what to do with our retirement investments such as 401K, IRA accounts? How do we escape from being trapped in such funds? 3 lessons can be drawn from this:
- Diversification: you need diversification at your overall account level, at your portfolio level and at your security level. Diversified funds are better than individual stocks, especially if you are only dealing with a handful of them. At the portfolio or account level, proper asset allocation determines majority of your returns and risk.
- Fundamentals: yes, we still believe fundamentals such as managers' track record, investment strategies, fund expenses, etc. These will serve you the first line of defense (and offense). So information provided by firms such as Morningstar.com is still useful.
- Technical or stop loss: on the other hand, we do believe that one need to have a ultimate line of defense: when a fund is not doing well for an extended period based on a systematic and well defined set of rules, you have to liquidate it. The permanent capital loss is just too great to hope for a recovery or rely on superhuman acts.
The last point is the most contentious and sometimes is against our super human or well educated committee members' consensus. Recognizing that adopting this will result in under performance in a super bull market or for an (extended) period of under performance of a good fund. But that is again an insurance one has to pay to avoid severe damages by such super humans.Just as a comparison, the David Swensen Six ETF Asset Individual Investor Plan consists of only six broad base ETFs and diversified asset allocation portfolios have outperformed both S&P index and other once great funds by big margins:Portfolio Performance Comparison (as of 11/16/2011)
Portfolio/Fund Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe David Swensen Six ETF Asset Individual Investor Plan Tactical Asset Allocation Moderate 12% 72% 11% 82% 10% 68% David Swensen Six ETF Asset Individual Investor Plan Strategic Asset Allocation Moderate 5% 26% 18% 90% 6% 27% FAIRX -22% -74% 10% 36% 0% -3% SPY 6% 4% 15% 23% -1% -9% LMVTX -1% -6% 15% 48% -10% -34% More detailed comparison.
Disclaimer: 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: SPX, COMP, ETFs, Headline, Mutual-Funds Tags: EEM, EFA, FAIRX, IYR, LMVTX, SPY, TIP, TLT, VWO
- Investment Management: Morgan Stanley Smith Barney Is Now on Risk Off Mode
11/15/2011
Morgan Stanley Smith Barney published its latest November viewpoints on portfolio strategies. It stated that the odds of a recession in the U.S. and beyond are “uncomfortably high.” Here are its tactical changes for portfolios:
The global cash represents dollars and other currencies. This itself should be treated as an asset class that needs careful management.
Compared with MyPlanIQ's Tactical Asset Allocation(TAA), we are cautious and about 1/3 to 1/2 of full risk asset exposure. Some of our plans reduced risk asset exposures in September, helping to even preserve some gains from risk assets.
See Six Core Asset ETFs that consists of six major asset classes US Stocks (SPY, VTI), International Stocks (EFA, VEU), Emerging Market Stocks (EEM, VWO), REITs (IYR, VNQ), Commodities (DBC, GSG) and Total US Bonds (AGG, BND).
Portfolio Performance Comparison (as of 11/14/2011)
Portfolio/Fund Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Six Core Asset ETFs Strategic Asset Allocation Moderate 3% 12% 13% 73% 5% 25% Six Core Asset ETFs Tactical Asset Allocation Moderate -0% -15% 8% 65% 9% 67% SPY 6% 4% 13% 23% -0% -9% VBINX 6% 14% 13% 46% 3% 10% More details here.
Symbols: SPX, COMP, SPY, VTI, EFA, EEM, VWO, VNQ, IYR, DBC, AGG, Investment Management, Asset Allocation
- Retirement Investments: Compared with Hedge Fund Performance
11/08/2011
The following is the newest October hot shot hedge fund performance data:
More specifically,
Strategies/Portfolios YTD (as of 10/31/2011) Fund of Funds - Diversifed -4.84% Diversified Macro -1.42% Global Macro -2.15% Six Core Asset ETF Strategic Asset Allocation Moderate 0.69% Six Core Asset ETF Tactical Asset Allocation Moderate -2.56% Permanent Portfolio Global trategic Asset Allocation Moderate 1% Permanent Portfolio Global Tactical Asset Allocation Moderate 2.13% Our Tactical Asset Allocation(TAA) is similar to Global macro hedge fund strategy. We can see that both Strategic Asset Allocation and Tactical Asset Allocation model portfolios are compared favorably with the hedge fund averages.
For more information, see Six Core Asset ETFs plan that has ONLY 6 broadbase ETFs (Vanguard low cost ETFs VTI, VEU, VNQ, VWO, BND and one Poweshares DB Commodities ETF DBC).
Permanent Global Portfolio ETF Plan uses Gold (GLD), silver (SLV) and other ETFs to form a diversified hedging portfolio.
Symbols: SPX, COMP, VTI, VEU, VNQ, VWO, BND, DBC, GLD, SLV, TLT, IYR, Retirement Investments, Hedge Funds, Asset Allocation
- Is My House an Investment?
11/07/2011
- The Peril of Underfunded Public Pensions
11/07/2011
- Balanced Portfolios Delivered Better Returns and Lower Risk
10/18/2011
- Strategic and Tactical Allocation for Retirement Investments
10/17/2011
- Don’t Fumble Your Retirement Planning
10/17/2011
- Ameriprise Employees Filed A Suit Over Expensive 401K Plan Fund Choices
10/13/2011
- 401K Investments: Alcoa Savings Plan Review
10/11/2011
- Retirement Investments: Right Expectations at The Right Time
09/23/2011
- 403B Investments: University of California Retirement Savings Program Review
09/16/2011
- 3 Portfolio Management Techniques for 3 Bears in The Double-dip Recession
09/15/2011
- Portfolio Management: Black Swan Tail Insurance vs. Tactical Asset Allocation
09/13/2011
- Black Swan Tail Insurance and Tactical Asset Allocation
09/13/2011
- 401K Investments: Southwest Airlines Should Expand Its Horizon for Their Employees' 401k Plan
09/12/2011
- Retirement Income ETFs vs. Income Mutual Funds: An Update
09/11/2011
- More Can Be Done by Financial Advisors
09/10/2011
- The Goldman Sachs 401(k) Plan Report On 06/03/2011
06/03/2011
Retirement investing is a long term process. This report reviews The Goldman Sachs 401(k) 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 investors in The Goldman Sachs 401(k) Plan can achieve reasonable investment results using asset allocation strategies.
Plan Review and Rating
As one of the largest investment banks in the world, Goldman Sachs (GS) does give its employees ample diversification opportunities. The plan consists of 36 funds. These funds enable participants to gain exposure to 6 major assets: US Equity, Foreign Equity, Commodity, Emerging Market Equity, REITs, Fixed Income.
As of Jun 2, 2011, 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 great (100%)
Fund Quality -- Rated as below average (14%)
Portfolio Building -- Rated as average (52%)
Overall Rating: average (55%)It is a bit surprising that the plan's fund quality is rated below average. In the plan, other than the low cost index funds, it provides many Goldman Sachs funds such as Goldman Sachs Asset Management L.P./Structured US Equity Fund (GSELX). This could possibly help your own fund business with the expense of lower qualities. We don't know what cost the plan is charged for these funds.
Current Economic and Market Conditions
As we are clearly entering a seasonally weak period for risk assets, global economies have clearly slowed down. Recently released Case-Shiller housing index showed that the U.S. is now in a double dip state for housing prices. Unemployment rate has been stuck at 9% level. Additional indicators such as conference board consumer confidence index and Chicago ISM index are all pointing to a slow down in the summer season.
Amid a string of bad economic news, risk assets have come down a bit, though they are still ranked high at the moment. Long term treasury bonds, however, have shot up in the anticipation of weakened economy. The following table shows the major asset class ranking in terms of their momentum.
Assets Class Symbols 05/27
Trend
Score05/20
Trend
ScoreDirection International REITs RWX 11.77% 10.82% ^ Commodities DBC 10.84% 10.32% ^ US Equity REITs VNQ 10.77% 10.41% ^ Gold GLD 9.42% 10.06% v Emerging Market Stks VWO 8.56% 6.72% ^ US Stocks VTI 8.29% 8.23% ^ International Developed Stks EFA 6.77% 5.23% ^ US High Yield Bonds JNK 6.37% 6.37% v International Treasury Bonds BWX 5.96% 4.66% ^ Frontier Market Stks FRN 4.05% 4.27% v Emerging Mkt Bonds PCY 3.57% 4.27% v Intermediate Treasuries IEF 2.71% 2.39% ^ US Credit Bonds CFT 2.5% 2.81% v Municipal Bonds MUB 2.13% 2.0% ^ Total US Bonds BND 1.99% 1.92% ^ Mortgage Back Bonds MBB 1.75% 1.8% v Treasury Bills SHV 0.07% 0.02% ^ 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
Foreign Equity: EFA or VEU
Commodity: DBC
Emerging Market Equity: EEM or VWO
REITs: IYR or VNQ or ICF
Fixed Income: AGG or BND
Performance chart (as of Jun 2, 2011)Performance table (as of Jun 2, 2011)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe The Goldman Sachs 401(k) Plan Tactical Asset Allocation Moderate 12% 113% 9% 70% 13% 98% The Goldman Sachs 401(k) Plan Strategic Asset Allocation Moderate 17% 214% 1% 5% 5% 30% Six Core Asset ETF Benchmark Tactical Asset Allocation Moderate 14% 141% 8% 64% 13% 92% Six Core Asset ETF Benchmark Strategic Asset Allocation Moderate 20% 188% 3% 16% 7% 36% From the above table, one can see that the plan is comparable with six core asset benchmark.
To summarize, participants in The Goldman Sachs 401(k) Plan can achieve very reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles. This plan provides adquate diversification but can be improved by working on fund qualities.
Symbols:GS, ^RUT, MLM, VTI, VEU, VWO, VNQ, DBC, BND, STLEX, SVSPX, VUSTX, VIGIX, VIVIX, VIMSX, SSEMX, VIPSX, STLAX, STLBX, WFBIX, STLCX, STLDX, STLFX, GMCFX, GSTGX, WACPX, GSELX, GCMAX, GSHTX, GSCGX, GSLAX, GSFIX, GGOIX, GREIX, QRAAX, PIGLX, SVRIX
Exchange Tickers: (GS), (^RUT), (CASH), (MLM), (VTI), (VEU), (VWO), (VNQ), (DBC), (BND), (STLEX), (SVSPX), (VUSTX), (VIGIX), (VIVIX), (VIMSX), (SSEMX), (VIPSX), (STLAX), (STLBX), (WFBIX), (STLCX), (STLDX), (STLFX), (GMCFX), (GSTGX), (WACPX), (GSELX), (GCMAX), (GSHTX), (GSCGX), (GSLAX), (GSFIX), (GGOIX), (GREIX), (QRAAX), (PIGLX), (SVRIX)