 |
Vanguard ETF: |  |
7.4%* |
|
Diversified Core: | |
8.1%* |
|
Six Core Asset ETFs: | |
7.3%* |
Articles on IYF
- Schwab Mutual Funds Beat out ETFs
04/06/2011
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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.
- Shell Versus Morningstar -- More is Better
02/27/2011
We recognize that technology continually changes the world charging into every aspect of our lives. Investing has also been significantly changed with instant access to news and the lead measured in milliseconds. Significant swings of the market can be impacted by the touch of a button.
For the longterm or retirement investor, the impact is more muted but still present and with the emergence of new investing apps, perhaps a larger change is occurring. Historically, plans for the long term investor have been limited to a relatively few funds, hopefully well chosen to give an easily comprehensable set of choices that still enable the creation of a strong portfolio to deliver good returns.
We have already reported on what we think is one of the best --Morningstar's 401K plan has only 26 funds that give access to six major assst classes. Based on MyPlanIQ's Plan Rating methodologythey achieve top ratings. This is about as good as it gets -- good diversification, great choice of funds, ability to create a non correlated portfolio and strong historical returns.
However, if we have access to applications that will automatically sift and sort a large number of funds, do we need to limit the number of funds in a plan?
To contrast this, we also reviewed a Shell 401k Plan which offers an extraordinary number of funds -- which we compare with the Morningstar alternatives.
Asset Class
Shell
Morningstar
Balanced Fund 28 1 REITs 3 1 Fixed Income 43 6 Commodity 0 1 Sector Fund 40 1 Foreign Equity 31 2 Emerging Market Equity 8 2 US Equity 143 11 Other 7 1 Total 303 26 Without a technological solution, the number of funds in the Shell plan is overwhelming, but if there is an application to sort and select, more funds can actually be better.
We can compare the rating of both plans.
Attribute Shell Morningstar Diversification Great (98%) Great (96%) Fund Quality Average (37%) Average (72%) Portfolio Building Great (88%) Great (96%) Overall Rating Above Average (76%) Above Average (89%) The Shell plan wins in diversification by having excellent coverage of the five main asset classes and some of the sub-classes which contribute to better returns. Morningstar is close behind with one more major asset class but less coverage of the secondary styles.
Morningstar funds are higher quality making it easier to select a strong portfolio which makes it easier to build a portfolio and hence Morningstar comes out on top in the ratings.
If we now compare historical results of the two plans:
Performance table (as of Feb 23, 2011)Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Royal Dutch Shell Tier III 401K Tactical Asset Allocation Moderate 9% 110% 11% 108% 14% 111% Royal Dutch Shell Tier III 401K Strategic Asset Allocation Moderate 13% 183% 2% 15% 5% 29% Morningstar Inc 401K Plan Tactical Asset Allocation Moderate 21% 170% 13% 125% 14% 127% Morningstar Inc 401K Plan Strategic Asset Allocation Moderate 14% 179% 3% 25% 5% 36% We see that in the five year time horizon, the performance of the plans are nearly identical -- note that the Sharpe index is higher for the Morningstar plan.
This nicely contrasts the brute force and elegant approach to retirement fund planning.
What we see going forward are more and more ETF plans with many alternatives in them (Vanguard has 64, TD Ameritrade has 101) that offer more of the brute force alternatives.
With investing apps to sort and rank the choices, this should enable investors to leverage these plans to get good returns at a low cost.
Disclosure:
MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up retirement 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,DBC,HYG,JNK,PHB,AOM,CIU,BIV,GWL,PFA,IVE,IWW,JKF,VTV,ELV,PWV,RPV,SCHV,EFV,PID,DWM,IYF,VFH,IPF,PFI,DRF,RYF,IVV,IYY,IWV,VV,DLN,RSP,SCHX,SHY,SHV,VGSH,PLK,USY,IVW,IWZ,JKE,VUG,ELG,QQQQ,RPG,SCHG,IJJ,IWS,JKI,VOE,EMV,PWP,RFV,UVU,IJS,IWN,JKL,VBR,DSV,PWY,RZV,UVT,IJR,IWM,JKJ,VB,DSC,PJM,DES,SAA,UWM,SCHA,GMM,PXH,DEM,SCHE,GBF,LAG,CSJ,BSV,VCSH,IJK,IWP,VOT,EMG,PWJ,RFG,UKW,TIP,GSG,
- Can we Beat Morningstar Bond Managers with ETF's
11/26/2010
In a previous article we questioned conventional wisdom that risk based assets as the main engine of portfolio growth. We presented a simple investment strategy -- pick the top seven bond managers and own the top performing bond fund which you review on a monthly basis (or quarterly if you prefer).
Currently, the top seven are:Bond Fund
Ticker
PIMCO Total Return
TCW Total Return Bond
Western Asset Core Bond
Metropolitan West Total Return Bond
Loomis Sayles Bond
Dodge & Cox Income
FPA New Income
In this article, we examine other bond only plans and see if the results can compete.
There are two other portfolios we present.
Goldman Sachs Global Tactical Asset Allocation:This is a cross-asset (or multi-asset) momentum based tactical asset allocation. This is based on a published report by Goldman Sachs on some of their funds. This is a simplified interpretation of strategies proposed by Goldman Sachs on Global Tactical Asset Allocation. The original strategy is based on the following:- Among six asset classes: US equity (represented by ETF S&P 500 Spider SPY), International equity (represented by MSCI ETF EFA), Real Estate (represented by NAREI ETF IYR), Commodities (represented by Goldman Sachs commodity index ETF GSG), US aggregate bond (represented by ETF AGG), cash, simply calculate the previous 12 month return at year end.
- Rank the year end returns among these 6 assets.
- Choose the top 3 assets and invest these top 3 assets for the next year in equal money amount.
We have modified this by removing all the risk based assets and replaced the aggregate bonds with US long term treasury bond fund. In addition, any asset has to have the score higher than CASH to qualify for the purchase.
This allows the best bond funds to be selected based on their momentum.
TDA Ameritrade's Commission Free ETFs
We recently reviewed their plan with over 100 commission free ETFs. We use this plan but drove the strategy to select only bond funds using MyPlanIQ's tactical asset allocation.
Given that some of the ETFs don't have a long history, we only went back to 2007. It is possible to see the impact of the strategies b
Portfolio Performance Comparison
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Best of Bonds (BoB) 9% 194% 12% 199% 11% 165% Bond ETFs 8% 86% 4% 38% 4% 33% Gold-Sachs-Bonds-TAA 9% 123% 7% 88% 6% 68%
Click for full details
Looking over a five year horizon, it is clear that BoB delivers the best results by quite a margin. In the shorter term, the results are much closer and as more fixed income ETF's become established and liquid, it will be worth watching and paying a return visit to look at returns in the future.
For now, the simplicity of the approach and the strength of the results leave BoB out in front. In this case, actively managed funds appear to beat the index funds.labels:investment,
Symbols:SPY,VTI,EFA,VEU,EEM,VWO,IYR,VNQ,ICF,AGG,BND,HYG,JNK,PHB,CIU,BIV,GII,PUI,DBU,RYU,UPW,IYH,IXJ,VHT,XBI,PBE,DBR,RYH,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,IYF,VFH,IPF,PFI,DRF,RYF,KXI,
- United Airlines Upgrades their 401K Plan
11/13/2010
We recently published a summary of the United Airlines 401K plan. Subsequent to this, United Airlines informed us that they have upgraded their plan in October 2010 and we now review the new plan.
The upgraded plan has 21 funds --little changed in number. These funds enable participants to gain exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income -- again the same as the last plan.We will compare the old and new funds as they both have similar composition.
Asset Class New Plan Old Plan U.S. Equity Excluding Company Stock 6 6 International Equity 2 2 Balanced Funds 3 4 Fixed Income 4 3 Target Date 5 6
As of Nov 11, 2010, the new plan's 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.Plan Rating Attribute New Plan Old Plan Diversification 77% 43% Fund Quality 86% 20% Portfolio Building 76% 42% Overall Rating 79% 35%
This is a significant jump across the board without introducing a lot more funds. The key reasons for the improvement are:- US and international equities have large, medium and small cap alternatives whereas previously it was just large cap stock
- The fixed income choices are higher quality
This should be a well performing three asset class plan.
Performance chart (as of Nov 10, 2010)
Performance table (as of Nov 10, 2010)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe United Airlines Flight Attendant 401(k) Plan Tactical Asset Allocation Moderate 6% 53% 6% 67% 9% 92% United Airlines Flight Attendant 401(k) Plan Strategic Asset Allocation Moderate 8% 89% 0% -0% 5% 29% United Airline 401K Plan 2010 Tactical Asset Allocation Moderate 8% 92% 6% 78% 10% 114% United Airline 401K Plan 2010 Strategic Asset Allocation Moderate 12% 123% 3% 23% 8% 57%
If we now compare this to the Kellogg plan as we did in the last article:
Performance chart (as of Nov 11, 2010)Performance table (as of Nov 11, 2010)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe United Airline 401K Plan 2010 Tactical Asset Allocation Moderate 8% 92% 6% 78% 10% 114% United Airline 401K Plan 2010 Strategic Asset Allocation Moderate 12% 123% 3% 23% 8% 57% Kellogg 401k Plan Tactical Asset Allocation Moderate 2% 19% 4% 45% 8% 72% Kellogg 401k Plan Strategic Asset Allocation Moderate 13% 100% 3% 16% 8% 43% We can see that the United Plan now nudges ahead of the Kellog plan in terms of risk adjusted returns over the last five years.
Kudos to United in recognizing that their 401K plan needed to be improved and providing a free upgrade for its employees.
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