- Relax: Doing Less With Your Investments
03/30/2011
In his latest Behavior Gap Newsletter, Carl Richards nails that feeling of confusion that comes when we learn first hand that “past performance is not a guarantee of future results.”
Investing isn’t like hiring a basketball coach, Richards argues, but rather like planting an oak tree:“You never plant a tree and then pull it out every time the wind blows just to check the roots.”
He also quotes this gem from Warren Buffett: “Benign neglect, bordering on sloth, remains the hallmark of our investment process.”
Why We Should Do Less With our Investments
In his book Wise Investing Made Simpler Larry Swedroe makes a similar point using a study conducted by a trio of academics. Edwin J. Elton and Martin J. Gruber of New York University, and Christopher R. Blake of Fordham University, examined 43 401(k) plans from 1994 through 1999.
Over those five years, the 401(k) plans added 215 new fund options for participants and dropped 45 funds from their plans. The funds added had a strong track record. Those that were dropped had poor recent performance.
The professors soon discovered that the new funds promptly underperformed those that had been given the heave-ho.
That brought the overall quality of the offerings down. Making matters worse, participants in the plans constantly chased performance by shifting money into last quarter’s top performers, the study notes.
Give Your Money A Chance To Grow
The argument Richards, Swedroe, and others make is simple. Having put thought and effort into setting up their investments, investors need to give them a chance to grow. That doesn’t mean you can’t appreciate their beauty and even check in on their performance now and again, but successful long-term investing requires patience.
If you have ideas for setting the right balance between enlightened remove and dangerous neglect, chime in.
Symbols: SPY, VTI, IYR, VNQ, ICF, AGG, BND, DBC, IVV, IYY, IWV, VV, DLN, RSP, SCHX, CLY, LQD, BLV, VCLT, DGL, IAU, DBG, AGOL
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- Will Harry Browne’s Permanent Portfolio Continue To Work?
03/29/2011
Portfolioist Article
March 25, 2011 by Geoff Considine
I just published an article over at Advisor Perspectives that is titled “What Investors Should Fear in The Permanent Portfolio” that looks at a very simple model portfolio proposed by Harry Browne. This portfolio contains equal allocations to four elements: stocks, gold, long-term government bonds and cash. Back in 1998 when Browne first proposed this portfolio in his book, Fail Safe Investing, it was decidedly harder to create your own version of this allocation model. Today, you can easily implement this portfolio at fairly low cost using four ETFs.
Harry Browne’s Permanent Portfolio has gotten a great deal of attention–and many new advocates–due to its solid performance in recent years when more traditional asset allocations suffered substantial losses. However, the question that investors need to ask is whether this will be a successful way to invest in the future.
I am not going to go through all of the analysis–but I will present three brief highlights here:
1) There is no question that the simple asset allocation in the Permanent Portfolio has done very well in the last decade and more.
2) The reliance on long-term bonds and gold has led to great performance but yields on long bonds are near historic lows and gold is near historic highs.
3) The Permanent Portfolio is not likely to fare well in a rising interest rate environment.
Ultimately, my conclusion is quite similar to that reached by William Bernstein, when he looked at this deceptively simple asset allocation. The statistics suggest that the Permanent Portfolio does indeed capture elements that will do well in a wide variety of market conditions. The danger for investors is piling into this strategy after a period that has been almost optimal for this approach vs. more conventional asset allocations. For many of the latecomers to the Permanent Portfolio, there is a substantial risk that they are chasing performance and are thus setting themselves up for much lower future returns.
Symbols: SPY,VTI,IYR,VNQ,ICF,AGG,BND,DBC,IVV,IYY,IWV,VV,DLN,RSP,SCHX,CLY,LQD,BLV,VCLT, DGL,IAU,DBG,AGOL,
Exchange Symbols:
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- E-Trade ETF Plan Hits Most of the High Notes
02/16/2011
ETrade All-Star ETF plan has recently been announced as no/low cost ETF plans become increasingly widespread. The company has attempted to make their selection on criteria such as low expense ratio, tracking error, liquidity, style purity, underlying holdings, and how well the ETF represents the index it seeks to replicate. In addition, ETFs chosen are passively managed, have at least 6-months trading history and are sponsored by a well balanced investment firm.
The growth in number of ETFs are such that many of them are still new. In our analysis, we ignore ETF's that have less than one year's history which may negatively impact returns in the short term but, over time, they will come on-line and provide greater diversification.
The plan consists of 40 funds giving exposure to 5 major assets: US Equity, Foreign Equity, REITs, Emerging Market Equity, Fixed Income.
| Asset Class | Ticker | Name |
| LARGE BLEND |
RSP |
Rydex S&P Equal Weight |
| LARGE BLEND |
SPY |
SPDR S&P 500 |
| LARGE GROWTH |
IWF |
iShares Russell 1000 Growth Index |
| LARGE GROWTH |
MGK |
Vanguard Mega Cap 300 Gr Index ETF |
| LARGE VALUE |
IWD |
iShares Russell 1000 Value Index |
| LARGE VALUE |
DIA |
SPDR Dow Jones Industrial Average |
| LARGE VALUE |
VYM |
Vanguard High Dividend Yield Indx ETF |
| LARGE VALUE |
MGV |
Vanguard Mega Cap 300 Value Index 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 |
IWM |
iShares Russell 2000 Index |
| Small Growth |
IWO |
iShares Russell 2000 Growth Index |
| SMALL VALUE |
IWN |
iShares Russell 2000 Value Index |
| Emerging Markets Bond |
EMB |
iShares JPMorgan USD Emerg Markets Bond |
| Emerging Markets Bond |
PCY |
PowerShares Emerging Mkts Sovereign Debt |
| High Yield Bond |
HYG |
iShares iBoxx $ High Yield Corporate Bd |
| High Yield Bond |
JNK |
SPDR Barclays Capital High Yield Bond |
| Inflation-Protected Bond |
TIP |
iShares Barclays TIPS Bond |
| Intermediate Government |
IEI |
iShares Barclays 3-7 Year Treasury Bond |
| Intermediate Government |
AGZ |
iShares Barclays Agency Bond |
| Intermediate Government |
ITE |
SPDR Barclays Capital Interm Term Trs |
| Intermediate-Term Bond |
AGG |
iShares Barclays Aggregate Bond |
| Intermediate-Term Bond |
CFT |
iShares Barclays Credit Bond |
| Intermediate-Term Bond |
BIV |
Vanguard Intermediate-Term Bond ETF |
| Intermediate-Term Bond |
BND |
Vanguard Total Bond Market ETF |
| LONG GOVERNMENT |
TLH |
iShares Barclays 10-20 Year Treasury Bd |
| Long-Term Bond |
BLV |
Vanguard Long-Term Bond Index ETF |
| SHORT GOVERNMENT |
SHY |
iShares Barclays 1-3 Year Treasury Bond |
| Short-Term Bond |
BSV |
Vanguard Short-Term Bond ETF |
| WORLD BOND |
BWX |
SPDR Barclays Capital Intl Treasury Bond |
| WORLD BOND |
BWZ |
SPDR Barclays Cap S/T Intl Treasury Bond |
| WORLD BOND |
WIP |
SPDR DB Intl Govt Infl-Protected Bond |
| DIVERSIFIED EMERGING MKTS |
BIK |
SPDR S&P BRIC 40 |
| DIVERSIFIED EMERGING MKTS |
VWO |
Vanguard Emerging Markets Stock ETF |
| Foreign Large Blend |
EFA |
iShares MSCI EAFE Index |
| Foreign Large Value |
IDV |
iShares Dow Jones Intl Select Div Idx |
| Foreign Small/Mid Value |
SCZ |
iShares MSCI EAFE Small Cap Index |
| Global Real Estate |
RWO |
SPDR Dow Jones Global Real Estate |
| REAL ESTATE |
RWR |
SPDR Dow Jones REIT |
This is a good selection of funds which hit the main notes -- good choices in fixed income and the US and choices for international and domestic real estate as well as multiple selections in Foreign and emerging market classes.
The US selections have one in the top ten performance ranking and so US there is room for improvement there.
|
TKR
|
Name
|
Rank
|
5 Yr AR%
|
3yr AR%
|
1yr AR%
|
MPIQ Score
|
|
IWO
|
iShares Russell 2000 Growth
|
5
|
3.73%
|
5.45%
|
39.77%
|
55.4%
|
|
VO
|
Vanguard Mid-Cap ETF
|
12
|
3.60%
|
3.05%
|
36.00%
|
47.8%
|
|
VOT
|
Vanguard Mid-Cap Growth ETF
|
13
|
0.00%
|
3.26%
|
42.68%
|
47.6%
|
|
IWN
|
iShares Russell 2000 Value Index
|
18
|
1.61%
|
3.65%
|
32.80%
|
41.5%
|
|
RSP
|
Rydex S&P Equal Weight
|
19
|
3.45%
|
3.58%
|
27.38%
|
39.7%
|
|
IWM
|
iShares Russell 2000 Index
|
20
|
2.26%
|
3.50%
|
29.63%
|
39.4%
|
|
VOE
|
Vanguard Mid-Cap Value ETF
|
22
|
0.00%
|
2.95%
|
29.26%
|
33.7%
|
|
DIA
|
SPDR DJ Industrial Average
|
27
|
4.35%
|
0.33%
|
19.15%
|
28.3%
|
|
IWF
|
iShares Russell 1000 Growth Index
|
29
|
3%
|
2.21%
|
17.76%
|
26.4%
|
|
SPY
|
SPDR S&P 500
|
30
|
2.07%
|
-0.11%
|
21.68%
|
25.7%
|
|
IWD
|
iShares Russell 1000 Value Index
|
36
|
1.14%
|
-2.81%
|
18.67%
|
16.7%
|
|
MGK
|
Vanguard Mega Cap 300 Growth
|
NRV
|
|
MGV
|
Vanguard Mega Cap 300 Value
|
NRV
|
|
VYM
|
Vanguard High Dividend Yield Indx
|
NRV
|
NRV means not ranked because the trading volume was below our cutoff
There is no commodity alternative. This may have been less important in the past, but with inflation almost inevitable, a commodities option such as DBC would make sense.
As of Feb 15, 2011, this plan investment choice is rated as average based on MyPlanIQ's 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 (89%)
Fund Quality -- Rated as below average (17%)
Portfolio Building -- Rated as average (42%)
Overall Rating: average (49%)
It is important to note that the fund quality rating is lower because of the lack of history -- as time marches on and the ETFs create more of a trail, we expect that rating to increase.
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 5 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
REITs: IYR or VNQ or ICF
Emerging Market Equity: EEM or VWO
Fixed Income: AGG or BND
Performance chart (as of Feb 15, 2011)
Performance table (as of Feb 15, 2011)
Currently Real Estate, US Equity and Commodities are doing well. US Equity and Real Estate available to Etrade All Star ETFs participants.
The plan runs neck and neck with the benchmark but we would expect it to pull away as more of the funds establish history and can be used in the portfolio.
To summarize, Etrade All Star ETF plan ticks most of the boxes but would be strengthened by adding commodity choices.
Disclosure:
MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
Symbols:SPY,VTI,EFA,VEU,EEM,VWO,IYR,VNQ,ICF,AGG,BND,HYG,JNK,PHB,CIU,BIV,GWL,PFA,IVE,IWW,JKF,VTV,ELV,PWV,RPV,SCHV,SCZ,EFV,PID,DWM,IFGL,RWX,IGOV,BWX,WIP,IVV,IYY,IWV,VV,DLN,RSP,SCHX,SHY,SHV,VGSH,PLK,USY,TLT,TLH,IEF,EDV,VGLT,TLO,PLW,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,CLY,LQD,BLV,VCLT,PCY,CSJ,BSV,VCSH,IEI,VGIT,ITE,IJK,IWP,VOT,EMG,PWJ,RFG,UKW,IJT,IWO,JKK,VBK,DSG,PWT,RZG,UKK,TIP,DBC
labels:IRA,Retirement,Investment,ETF,Portfolio,construction,
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- American Express Provides Above Average Investment Choices in Its 401K Plan
12/06/2010
This report reviews AMERICAN EXPRESS RETIREMENT SAVINGS 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 AMERICAN EXPRESS RETIREMENT SAVINGS PLAN can achieve reasonable investment results using asset allocation strategies.
Plan Review and Rating
American Express Company provides charge and credit payment card products, and travel-related services worldwide. It offers a range of products and services, including charge and credit card products; expense management products and services; consumer and business travel services; stored value products, such as Travelers Cheques and prepaid products; network services; merchant acquisition, and merchant processing, point-of-sale, servicing and settlement, and marketing products and services for merchants; and fee services, including market and trend analyses along with related consulting services and customer loyalty and rewards programs. American Express was founded in 1850 and is headquartered in New York, New York.
AMERICAN EXPRESS RETIREMENT SAVINGS PLAN consists of 24 funds. These funds enable participants to gain exposure to 4 major assets: US Equity, Foreign Equity, Emerging Market Equity, Fixed Income. The list of minor asset classes covered:
Diversified Emerging Mkts: EEM, GMM, PXH, DEM, SCHE
Foreign Large Blend: EFA, VEU, GWL, PFA
Foreign Large Value: EFV, PID, DWM
Foreign Small/mid Value: SCZ
Intermediate-term Bond: AGG, CIU, BIV, BND
Large Blend: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX
Long-term Bond: CLY, LQD, BLV, VCLT
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
Us Equity: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX
As of Dec 2, 2010, this plan investment choice is rated as Above 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 Average (61%)
Fund Quality -- Rated as Average (60%)
Portfolio Building -- Rated as Good (96%)
Overall Rating: Above Average (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 AMERICAN EXPRESS RETIREMENT SAVINGS 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)
Currently, asset classes in US Equity (SPY,VTI), Foreign Equity (EFA,VEU), Emerging Market Equity (EEM,VWO) and Fixed Income (AGG,BND) are doing relatively well. These asset classes are available to AMERICAN EXPRESS RETIREMENT SAVINGS PLAN participants.
To summarize, AMERICAN EXPRESS RETIREMENT SAVINGS PLAN plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles.
labels:investment,
Symbols:AXP,SPY,VTI,EFA,VEU,EEM,VWO,AGG,BND,IVV,IYY,IWV,VV,DLN,RSP,SCHX,CIU,BIV,GWL,PFA,SCZ,EFV,PID,DWM,IJH,IWR,JKG,VO,MDY,EMM,PJG,DON,EZM,MVV,IJR,IWM,JKJ,VB,DSC,PJM,DES,SAA,UWM,SCHA,GMM,PXH,DEM,SCHE,CLY,LQD,BLV,VCLT, ,
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- Top Tier ETF Broker Playoffs II
10/26/2010
ETF’s continue to broaden their appeal both in terms of flexibility and low cost. With commission free ETF’s, more money stays in the investors pocket rather than disappearing in fees. We have completed the first analysis of TD Ameritrade and Schwab, we now proceed to examine Vanguard and Fidelity – two long term ETF providers.
Vanguard is one of the largest index fund and ETF providers offering commission-free trading to its brokerage clients that use its lineups of 62 proprietary ETFs. Commission free ETF's are also offered by Fidelity and Schwab but Vanguard has the highest number of proprietary funds available.
These funds enable participants to gain exposure to 5 major assets: Us Equity , Foreign Equity , Emerging Market Equity , Reits , Fixed Income .
The list of minor asset classes covered:
Communications: IXP , PTE , DGG , LTL
Consumer Discretionary: RXI , VCR
Consumer Staples: KXI , VDC , PSL , DPN , RHS
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
Financial: IYF , VFH , IPF , PFI , DRF , RYF
Foreign Large Blend: EFA , VEU , GWL , PFA
Foreign Small/mid Growth: IFSM , VSS , SCHC
Health: IYH , IXJ , VHT , XBI , PBE , DBR , RYH
High Yield Bond: HYG , JNK , PHB
Industrials: IYJ , EXI , VIS
Intermediate Government: IEI , VGIT , ITE
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
Long Government: TLT , TLH , IEF , EDV , VGLT , TLO , PLW
Long-term Bond: CLY , LQD , BLV , VCLT
Mid-cap Blend: IJH , IWR , JKG , VO , MDY , EMM , PJG , DON , EZM , MVV
Mid-cap Growth: IJK , IWP , VOT , EMG , PWJ , RFG , UKW
Mid-cap Value: IJJ , IWS , JKI , VOE , EMV , PWP , RFV , UVU
Natural Resources: IYM , IGE , VAW , XLB , XME , PYZ , DBN , RTM , UYM
Real Estate: IYR , ICF , VNQ
Short Government: SHY , SHV , VGSH , PLK , USY
Short-term Bond: CSJ , BSV , VCSH
Small Blend: IJR , IWM , JKJ , VB , DSC , PJM , DES , SAA , UWM , SCHA
Small Growth: IJT , IWO , JKK , VBK , DSG , PWT , RZG , UKK
Small Value: IJS , IWN , JKL , VBR , DSV , PWY , RZV , UVT
Technology: MTK , PTF , DBT , RYT , ROM
Utilities: GII , PUI , DBU , RYU , UPW
World Stock: IOO , VT
As of Oct 22, 2010, this plan investment choice is rated as 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 average (57%)
Fund Quality -- Rated as average (60%)
Portfolio Building -- Rated as average (39%)
Overall Rating: average (50%)
The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies (
SAA and
TAA , both provided by MyPlanIQ). For comparison purpose, we also include the moderate model portfolios of a typical 5 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 )
Reits:( IYR or VNQ or ICF )
Fixed Income:( AGG or BND )
Performance chart (as of Oct 22, 2010)
Performance table (as of Oct 22, 2010)
|
Portfolio Name
|
1Yr AR
|
1Yr Sharpe
|
3Yr AR
|
3Yr Sharpe
|
5Yr AR
|
5Yr Sharpe
|
|
|
13%
|
83%
|
6%
|
35%
|
13%
|
81%
|
|
|
15%
|
116%
|
2%
|
6%
|
8%
|
42%
|
|
|
11%
|
72%
|
7%
|
54%
|
15%
|
105%
|
|
|
14%
|
103%
|
3%
|
13%
|
9%
|
41%
|
Currently, asset classes in Emerging Market Equity( EEM , VWO ) , Reits( IYR , VNQ , ICF ) and Fixed Income( AGG , BND ) are doing relatively well. These asset classes are available to Vanguard 62 participants.
Fidelity now makes trading 25 iShares ETFs for free. These ETFs cover complete US equity sizes and styles (large/mid/small caps and growth/blend/value styles). It covers international equity markets well too. In additon, it has good fixed income ETFs. The missing major asset classes are REITs and commodities. We hope those will be made free too. A plan called
Fidelity Commission Efficient ETFs extends this plan by including several addtional ETFs (which cost $7.95 flat commission per trade).
Fidelity 25 Commission Free ETFs's 401K plan consists of 25 funds. These funds enable participants to gain exposure to 4 major assets: Us Equity , Foreign Equity , Emerging Market Equity , Fixed Income . The list of minor asset classes covered:
Diversified Emerging Mkts: EEM , GMM , PXH , DEM , SCHE
Emerging Markets Bond: PCY
Foreign Large Blend: EFA , VEU , GWL , PFA
Foreign Small/mid Value: SCZ
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
Long-term Bond: CLY , LQD , BLV , VCLT
Mid-cap Blend: IJH , IWR , JKG , VO , MDY , EMM , PJG , DON , EZM , MVV
Mid-cap Growth: IJK , IWP , VOT , EMG , PWJ , RFG , UKW
Mid-cap Value: IJJ , IWS , JKI , VOE , EMV , PWP , RFV , UVU
Muni National Long: MUB , TFI , PZA , MLN
Small Blend: IJR , IWM , JKJ , VB , DSC , PJM , DES , SAA , UWM , SCHA
Small Growth: IJT , IWO , JKK , VBK , DSG , PWT , RZG , UKK
Small Value: IJS , IWN , JKL , VBR , DSV , PWY , RZV , UVT
World Stock: IOO , VT
As of Oct 22, 2010, this plan investment choice is rated as 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 average (63%)
Fund Quality -- Rated as poor (9%)
Portfolio Building -- Rated as below average (14%)
Overall Rating: below average (27%)
The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies (
SAA and
TAA , both provided by MyPlanIQ). 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 Oct 22, 2010)
Performance table (as of Oct 22, 2010)
|
Portfolio Name
|
1Yr AR
|
1Yr Sharpe
|
3Yr AR
|
3Yr Sharpe
|
5Yr AR
|
5Yr Sharpe
|
|
|
3%
|
24%
|
3%
|
19%
|
11%
|
71%
|
|
|
10%
|
68%
|
-0%
|
-3%
|
7%
|
28%
|
|
|
2%
|
14%
|
6%
|
47%
|
14%
|
90%
|
|
|
10%
|
75%
|
2%
|
5%
|
8%
|
37%
|
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 Fidelity 25 Commission Free ETFs participants.
To summarize:
- Vanguard 62 Commission Free ETFs plan participants have seen returns in the 8-13% range for a moderate portfolio with strategic and tactical asset allocation based on having a five asset class portfolio.
- Fidelity 25 Commission Free ETFs plan participants have seen returns in the 7-11% range for a moderate portfolio with strategic and tactical asset allocation based on having a five asset class portfolio.
Given the greater number and greater diversification, the Vanguard plan would be the one most likely to continue to deliver better risk adjusted returns and so is declared the winner and moves on to the final round
labels:investment,
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