12/27/2010

Last week, investors took a vacation: major asset movements were subdued while bonds continued to show signs of life: other than emerging market bonds (PCY or EMB), all bond sub-assets registered positive gains.

It is noteworthy to point out that U.S. stocks (VTI or SPY) and commodities (GSG or DBC) have been very strong; they were the only two risk assets that had positive returns last week. In addition, U.S. high yield (junk) bonds continued to recoup their losses and were consistent with the risk chasing attitude investors have shown recently. Municipal and mortgage back bonds were still at negative trend territory, showing a downtrend that was worse than cash (SHV or short term treasury bills).

All in all, it was a quiet week and investors enjoyed their long awaited holidays.

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labels:investment,

Symbols:AGG,BND,BWX,CFT,DBA,DBC,EEM,EFA,EMB,FRN,GLD,GSG,HYG,ICF,IEF,IWM,IYR,JNK,MBB,MUB,PCY,PHB,RWX,SHV,SPY,TLT,VEU,VNQ,VTI,VWO,

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12/21/2010

Last week, Emerging Market Bonds (PCY), T-Bills (SHV), MBS Bonds (MBB), and High Yields (JNK) were under selling pressure. The drop in emerging-markets debt came as a surprise as it gave up ground gained early in the week after the Fed’s reaffirmation on QE2. For more information, please visit MyPlanIQ 360 Degree Market View.

We make the following observations about last week's development:

• Emerging Market Debt (PCY) weakened. Close attention is paid by investors to the inflationary pressures emerging markets are facing. Inflation has been rising rapidly in some emerging economies such as China. Monetary policy and interest rate changes will be in focus in the near term and remain as a catalyst for the market.

• International Inflation Protected Bond fund (WIP) now takes the second spot in our following trend table with a gain of 0.5% last week

• All medium-to-long-term U.S. government securities (TLH, TLT) gained ground last week. The flattening yield curve signals that the market expects no additional round of quantitative easing and usually foreshadows the end of Federal Reserve’s simulative rates cutting.

• The outlook for the municipal bond market (MUB) (CMF) (NYF) remains tepid: States' fiscal problems may worsen in 2011 and put pressure on the federal government to bail out struggling states to avoid defaults. New Jersey governor Chris Christie commented on the dire fiscal problems many states face on 60 minutes that “the day of reckoning has arrived. That's it. And it's gonna arrive everywhere.”
  

Click charts to enlarge:

In conclusion, investors should remain cautious of municipal bonds. Default risk remains high and yields are poised to jump higher as the end of the federally subsidized Build America Bonds program puts more financial pressure on debt-riddled states and cities.

labels:investment,

Symbols:AGG,BND,BWX,CIU,CMF,CSJ,EMB,HYG,IEF,JNK,LQD,MBB,MUB,NYF,PCY,PHB,SHV,SHY,TIP,TLH,TLT,WIP,

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12/20/2010

Major asset trends are critical to tactical asset allocation strategies such as our Tactical Asset Allocation. We track the trends weekly.

Last week, municipal bonds (MUB) had the strongest recovery. Credit bonds (investment grade bonds, CFT, CIU, LQD) also recovered some. With Bill Gross at PIMCO putting his own money to beaten down closed end bond funds (see here), investors were encouraged and flocked back to bonds.

The most noticeable trend shuffling is that commodities were strong and inched up to the top five spots. Among other risk assets, U.S. stocks continued to be strong while investors should pay attention to emerging market stocks' performance: they were lackluster in the past several weeks due to inflation concerns in China and India as well as the Korean peninsula tension.

click to enlarge

labels:investment,

Symbols:AGG,BND,BWX,CFT,DBA,DBC,EEM,EFA,EMB,FRN,GLD,GSG,HYG,ICF,IEF,IWM,IYR,JNK,MBB,MUB,PCY,PHB,RWX,SHV,SPY,TLT,VEU,VNQ,VTI,VWO,

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12/14/2010

Fixed income indices provide important insight into debt market conditions that are key to asset allocation strategies such as our Tactical Asset Allocation. MyPlanIQ uses representative ETFs and tracks detailed weekly bond trend movements. For detailed information, please visit MyPlanIQ 360 Degree Market View.

As the economic outlook continues to improve with better-than-expected U.S. trade and consumer-sentiment reports, Treasuries sank in the week ended on 12/10. The brighter economic outlook has prompted investors to seek higher returns in riskier assets.

The 10-year note's yield surged more than 0.30% last week, driving down prices of the 10-20 Year Treasury Bond Fund (TLH). The rising yields also pushed up long-term borrowing costs for consumers and businesses. As a result, national mortgage rates moved higher last week. The MBS Bond Fund (MBB) registered a weekly drop of 0.66%. With a struggling housing market, higher mortgage rates pose a threat to the recovery of the housing sector and the broader economy. If high interest rates persist in the weeks ahead, we expect to see a further drop in (MBB).

Lower Treasury bond prices and higher yields were also putting pressure on the high yield bonds (JNK). High yield investors need to remain cautious and pay particular attention on the rate at which the Treasury benchmark rises - the pace of increase in the junk bond yield spreads over Treasuries might eventually catch up with that of the rising benchmark, further putting pressure on the prices of junk bonds.

Yields on munis (MUB) also rose along with Treasuries as investors grappled with the ramifications of the likely end of the government-subsidized Build America Bond Program. As more states and cities rush to tap the tax-exempt debt market to raise funds before year-end, investors are concerned that, as a result of incremental supply, there will be a sell-off. Uncertainties around the extension of this popular program has triggered a great deal of volatility in the market and will remain to be the case until after the passage of the tax bill.

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Top Three indicators

Bottom Three Indicators

labels:investment,

Symbols:AGG,BND,BWX,CIU,CMF,CSJ,EMB,HYG,IEF,JNK,LQD,MBB,MUB,NYF,PCY,PHB,SHV,SHY,TIP,TLH,TLT,WIP,

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12/13/2010

Last week, we continued to observe major weakness in fixed income markets. From our Market View, one can see that most bond ETFs underwent 1-2% loss. Municipal bonds and intermediate term treasuries were the biggest losers. Municipal bonds were avoided due to the concerns on the dire financial situations of state and local governments, let alone the extreme low yields to begin with. Investors were also worried about longer term bonds, including treasuries and corporate bonds based on inflation outlook.

Based on the major asset price trends in the following table, other noticeable developments include:

1. US Stocks were very strong, now placed in the third spot among all other major asset classes.
2. US REITs continued their weakness, losing 1.3% last week and were out of top five spots.
3. all fixed income asset classes were at the bottom of the ranking: the lower the perceived risks based on conventional wisdom, the lower their rankings were.
4. Broad base commodities were relatively intact while gold continued its correction.

The takeaway is that investors continued their strong risk appetite. Among risk assets, US stocks stood out as worries in European debt markets and inflation pressure in emerging markets dampened demands on those assets.

labels:investment,

Symbols:AGG,BND,BWX,CFT,DBA,DBC,EEM,EFA,EMB,FRN,GLD,GSG,HYG,ICF,IEF,IWM,IYR,JNK,MBB,MDY,MUB,PCY,PHB,QQQQ,RWX,SHV,SLV,SPY,TLT,VEU,VNQ,VTI,VWO,

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12/07/2010

11/30/2010

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10/19/2010

10/09/2010

09/26/2010

09/16/2010

12/07/2010

Retirement investing is an integral part of American personal finance. With $8.9 trillion parked in over 800 thousand retirement plans such as 401K, millions of Americans will increasingly rely on their 401K accounts to fund their future retirement needs. This article is part of a series of case studies we are conducting for various 401K plans. In this article, we will discuss how participants in TD Ameritrade Commission Free ETFs can achieve reasonable investment results using asset allocation strategies. We will also discuss how those portfolios are positioned in today’s market environment.

TD Ameritrade (Ticker: AMTD) offers 100+ commission free ETFs for its clients. The main restriction is that customers have to hold these ETFs for more than 30 days to make such trades eligible for commission free.

In this plan, the minimum holding period for each fund is set to be 1 month, which is equivalent to 30 days.

See the official TD Ameritrade offering for more details.

TD Ameritrade Commission Free ETFs's 401K plan consists of 101 funds. These funds enable participants to gain exposure to 6 major assets: US Equity , Foreign Equity , Commodity , Emerging Market Equity , REITs , 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
Emerging Markets Bond: PCY
Equity: VTI , VT
Europe Stock: IEV , VGK , PEF , DEB
Foreign Large Blend: EFA , VEU , GWL , PFA
Foreign Large Growth: EFG
Foreign Large Value: EFV , PID , DWM
Foreign Small/mid Growth: IFSM , VSS , SCHC
Foreign Small/mid Value: SCZ
Global Real Estate: IFGL , RWX
High Yield Bond: HYG , JNK , PHB
Inflation-protected Bond: TIP
Intermediate Government: IEI , VGIT , ITE
Intermediate-term Bond: AGG , CIU , BIV , BND
Japan Stock: EWJ , JPP , PJO , DXJ
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
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
Moderate Allocation: AOM
Multisector Bond: AGG , GBF , BND , LAG
Muni National Interm: ITM
Muni National Long: MUB , TFI , PZA , MLN
Muni National Short: SUB , SHM , PVI , SMB
Pacific/asia Ex-japan Stk: EPP , AAXJ , GMF , PAF , DND
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
Specialty-real Estate: RWR , PSR , URE
World Allocation: AOR , AOA
World Bond: IGOV , BWX , WIP
World Stock: IOO , VT

As of Dec 3, 2010, 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 (97%)
Fund Quality -- Rated as below average (21%)
Portfolio Building -- Rated as great (87%)
Overall Rating: above average (70%)

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 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 Dec 3, 2010)

Performance table (as of Dec 3, 2010)

Currently, asset classes in US Equity ( SPY , VTI ) and Emerging Market Equity ( EEM , VWO ) are doing relatively well. These asset classes are available to TD Ameritrade Commission Free ETFs participants.

To summarize, TD Ameritrade Commission Free ETFs plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles. Currently, the tactical asset allocation strategy indicates overweighing on US Equity and Emerging Market Equity funds.


Disclosure:

Symbols: , SPY , VTI , EFA , VEU , EEM , VWO , IYR , VNQ , ICF , AGG , BND , DBC , VT , HYG , JNK , PHB , AOM , AOK , CIU , BIV , ITM , SUB , SHM , PVI , SMB , AOR , AOA , MUB , TFI , PZA , MLN , EFG , GWL , PFA , IVE , IWW , JKF , VTV , ELV , PWV , RPV , SCHV , SCZ , EFV , PID , DWM , IFGL , RWX , IGOV , BWX , WIP , RWR , PSR , URE , IVV , IYY , IWV , VV , DLN , RSP , SCHX , IOO , 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 , CLY , LQD , BLV , VCLT , GBF , LAG , PCY , CSJ , BSV , VCSH , IEI , VGIT , ITE , IJK , IWP , VOT , EMG , PWJ , RFG , UKW , ILF , GML , IJT , IWO , JKK , VBK , DSG , PWT , RZG , UKK , TIP , EPP , AAXJ , GMF , PAF , DND , EWJ , JPP , PJO , DXJ , GSG