Top Plans for Brokerages

	Vanguard ETF:		7.4%*
	Diversified Core:		8.1%*
	Six Core Asset ETFs:		7.3%*

*:5 Yr Annualized Return of TAA Moderate Portfolio

News and Commentaries

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News and Article
Regular Report

TD Ameritrade Commission Free ETFs: Comprehensive Portfolio Building Blocks

10/19/2010

TD Ameritrade (Ticker: AMTD) just announced that it offers 100+ commission free ETFs for its clients.The 100+ (a precise number is 101) ETFs were selected by Morningstar that include ETFs from iShares, Vanguard, State Street, PowerShares, and others. In comparison, Schwab's free ETFs include only 11 of its own funds. Similarly, Vanguard offers 47 Vanguard ETFs for free. Fidelity was the first one that offers 25 iShares ETFs for free. See the official TD Ameritrade offering for more details.

MyPlanIQ views this is a very significant step for small investors (well we are not sure whether TD Ameritrade would still offer such a deal to very large accounts). We have constructed an investment plan TD Ameritrade Commission Free ETFs to take advantage of these ETFs. Though for the trades of these ETFs to be eligible for commission free, TD Ameritrade's customers have to hold these ETFs for more than 30 days, such a restriction is not significant for our plan since the plan only rebalances at most once per month. In this plan, the minimum holding period for each fund is set to be 1 month, which is equivalent to 30 days.

TD Ameritrade Commission Free ETFs's 401K plan consists of 101 funds. These funds enable participants to gain exposure to 6 major assets: Emerging Market Equity , Foreign Equity , Fixed Income , US Equity , Commodity , REITs . We view this is the most comprehensive coverage of major asset classes.

The list of minor asset classes covered are:

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 Oct 15, 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 (29%)
Portfolio Building -- Rated as great (90%)
Overall Rating: above average (74%)

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 five asset SIB (Simpler Is Better) plan . This SIB plan has the following candidate index funds and their ETFs equivalent:

REITs:( IYR or VNQ or ICF )
Fixed Income:( AGG or BND )
Commodity:(DBC)
Foreign Equity:( EFA or VEU )
Emerging Market Equity:( EEM or VWO )
US Equity:( SPY or VTI )
Performance chart (as of Oct 15, 2010)

Performance table (as of Oct 15, 2010)

Portfolio Name	1Yr AR	1Yr Sharpe	3Yr AR	3Yr Sharpe	5Yr AR	5Yr Sharpe
TD Ameritrade Commission Free ETFs Tactical Asset Allocation Moderate	13%	87%	13%	86%	20%	128%
TD Ameritrade Commission Free ETFs Strategic Asset Allocation Moderate	10%	85%	-1%	-6%	9%	47%
Six Core Asset ETFs Tactical Asset Allocation Moderate	10%	65%	9%	66%	17%	114%
Six Core Asset ETFs Strategic Asset Allocation Moderate	11%	84%	2%	9%	9%	42%

To summarize, TD Ameritrade Commission Free ETFs plan is very comprehensive and allows investors to achieve significant performance with reasonable risk. With now all of the top discount brokers (Fidelity, Schwab and TD Ameritrade) offering such commission free ETFs, investors are now free from trading cost and focus on portfolio building in terms of better asset allocation strategies.

labels:investment,

Symbols:SUB,SHM,PVI,SMB,EPP,AAXJ,GMF,PAF,DND,SHY,SHV,VGSH,PLK,USY,CSJ,BSV,VCSH,AOR,AOA,IGOV,BWX,WIP,IOO,VT,RWR,PSR,URE,IJS,IWN,JKL,VBR,DSV,PWY,RZV,UVT,IJT,IWO,JKK,VBK,DSG,PWT,RZG,UKK,IJR,IWM,JKJ,VB,DSC,PJM,DES,SAA,UWM,SCHA,ITM,MUB,TFI,PZA,MLN,AGG,GBF,BND,LAG,IJJ,ETFs,Portfolio,Building,Asset,Allocation,Commission,Free,

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Top Tier ETF Providers Playoffs II

10/19/2010

Based on an article published by Bank Investment Consultant by Matt Ackermann, Vanguard, one of the largest index fund and ETF providers, will offer commission-free trading to its brokerage clients that use its lineups of 46 proprietary ETFs. This represents a comparable move as Fidelity and Schwab.

In addition to Fidelity and Schwab plans, MyPlanIQ now has a Vanguard major ETF plan. Notice since most Vanguard ETFs have short history, the performance data of the model portfolios are meaningful since 2003 (before that, most ETFs did not exist).

The following is the list of the ETFs supported in this plan (for up to date info, please see the Vanguard ETF page.

	Consumer Discretionary	VCR
	Consumer Staples	VDC
	Dividend Appreciation	VIG
	Emerging Markets	VWO
	Energy	VDE
	Europe Pacific	VEA
	European	VGK
	Extended Duration Treasury	EDV
	Extended Market	VXF
	Financials	VFH
	FTSE All-World ex-US	VEU
	FTSE All-World ex-US Small-Cap	VSS
	Growth	VUG
	Health Care	VHT
	High Dividend Yield	VYM
	Industrials	VIS
	Information Technology	VGT
	Intermediate-Term Bond	BIV
	Intermediate-Term Corporate Bond	VCIT
	Intermediate-Term Government Bond	VGIT
	Large-Cap	VV
	Long-Term Bond	BLV
	Long-Term Corporate Bond	VCLT
	Long-Term Government Bond	VGLT
	Materials	VAW
	Mega Cap 300	MGC
	Mega Cap 300 Growth	MGK
	Mega Cap 300 Value	MGV
	Mid-Cap	VO
	Mid-Cap Growth	VOT
	Mid-Cap Value	VOE
	Mortgage-Backed Securities	VMBS
	Pacific	VPL
	REIT	VNQ
	Short-Term Bond	BSV
	Short-Term Corporate Bond	VCSH
	Short-Term Government Bond	VGSH
	Small-Cap	VB
	Small-Cap Growth	VBK
	Small-Cap Value	VBR
	Telecommunication Services	VOX
	Total Bond Market	BND
	Total Stock Market	VTI
	Total World Stock	VT
	Utilities	VPU
	Value	VTV

Vanguard ETFs's 401K plan consists of 43 funds. These funds enable participants to gain exposure to 5 major assets: Emerging Market Equity , Foreign Equity , Fixed Income , US Equity , REITs . 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
Industrials: IYJ,EXI , VIS
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 15, 2010, this plan investment choice is rated as averagebased 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 above average (74%)
Fund Quality -- Rated as below average (33%)
Portfolio Building -- Rated as average (37%)
Overall Rating: average (47%)

REITs:( IYR or VNQ or ICF )
Fixed Income:( AGG or BND )
Foreign Equity:( EFA or VEU )
Emerging Market Equity:( EEM or VWO )
US Equity:( SPY or VTI )
Performance chart (as of Oct 15, 2010)

Performance table (as of Oct 15, 2010)

Portfolio Name	1Yr AR	1Yr Sharpe	3Yr AR	3Yr Sharpe	5Yr AR	5Yr Sharpe
Vanguard ETFs Tactical Asset Allocation Moderate	10%	67%	6%	39%	13%	84%
Vanguard ETFs Strategic Asset Allocation Moderate	13%	92%	3%	9%	8%	39%
Five Core Asset Index ETF Funds Tactical Asset Allocation Moderate	10%	65%	7%	48%	15%	103%
Five Core Asset Index ETF Funds Strategic Asset Allocation Moderate	14%	99%	3%	10%	9%	41%

Currently, asset classes in REITs( IYR , VNQ , ICF ) , Fixed Income( AGG , BND ) and Emerging Market Equity( EEM , VWO ) are doing relatively well. These asset classes are available to Vanguard ETFs participants.

To summarize, Vanguard 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 reits , emerging market equity and fixed income funds.

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Top Tier ETF Provider Playoffs

10/19/2010

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. In addition, while many of these ETF’s have a 30 day minimum hold, this is ideal for long term investing when making changes more often than that can be counter productive.

Four companies offer commission free ETF’s and we are going to compare the offerings in detail to determine which is likely to offer the best value to the investor.

In this article we are going to compare Schwab and TD Ameritrade.

Schwab (Ticker SCHW) is a relative late comer to the ETF party. They offer the fewest ETF’s and the ETF’s have the shortest history. They only provide their own ETF's commission free. However, Schwab has a huge network and powerful brand so we expect Schwab to be a significant player in the market.

Schwab ETF

NEW Bond ETFs

Schwab U.S. TIPS ETF™

Schwab Short-Term U.S. Treasury ETF™

Schwab Intermediate-Term U.S. Treasury ETF™

Domestic Equity ETFs

Schwab U.S. Broad Market ETF™

Schwab U.S. Large-Cap ETF™

Schwab U.S. Large-Cap Growth ETF™

Schwab U.S. Large-Cap Value ETF™

Schwab U.S. Small-Cap ETF™

International Equity ETFs

Schwab International Equity ETF™

Schwab International Small-Cap Equity ETF™

Schwab Emerging Markets Equity ETF™

Notable properties about the Schwab offering

The expense ratios are low
There are four asset classes with a good choice of funds
We would have liked to have seen more choices with other providers
We would have liked to have seen funds with a longer history
We would expect real estate to be added before long
We would expect more choices in the international and emerging market segments before long

As most of the funds are very new, it’s impossible to do real back testing with the funds. So we have selected a commission efficient portfolio that includes:

Asset Class	Ticker	Name
LARGE VALUE	SCHV	Schwab U.S. Large-Cap Value ETF
LARGE BLEND	SCHX	Schwab U.S. Large-Cap ETF
LARGE BLEND	SCHB	Schwab U.S. Broad Market ETF
LARGE GROWTH	SCHG	Schwab U.S. Large-Cap Growth ETF
LARGE GROWTH	IWF	iShares Russell 1000 Growth Index
SMALL VALUE	IJS	iShares S&P SmallCap 600 Value Index
SMALL BLEND	SCHA	Schwab U.S. Small-Cap ETF
Small Growth	IJT	iShares S&P SmallCap 600 Growth
Foreign Large Blend	SCHF	Schwab International Equity ETF
FOREIGN SMALL/MID GROWTH	SCHC	Schwab International Small-Cap Eq ETF
DIVERSIFIED EMERGING MKTS	SCHE	Schwab Emerging Markets Equity ETF
Inflation-Protected Bond	TIP	iShares Barclays TIPS Bond
Intermediate Government	IEI	iShares Barclays 3-7 Year Treasury Bond
SHORT GOVERNMENT	SHY	iShares Barclays 1-3 Year Treasury Bond
Inflation-Protected Bond	SCHP	Schwab U.S. TIPS ETF
SHORT GOVERNMENT	SCHO	Schwab Short-Term U.S. Treasury ETF
Intermediate Government	SCHR	Schwab Intermediate-Term U.S. Trsy ETF
LARGE VALUE	VTV	Vanguard Value Index
LARGE BLEND	VTI	Vanguard Total Stock Market ETF
LARGE VALUE	VTV	Vanguard Value ETF
DIVERSIFIED EMERGING MKTS	VWO	Vanguard Emerging Markets Stock ETF
Foreign Small/Mid Value	SCZ	iShares MSCI EAFE Small Cap Index
Foreign Large Blend	EFA	iShares MSCI EAFE Index

As of Oct 15, 2010, the Schwab ETF investment choice is rated asaverage 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 below average (19%)
Fund Quality -- Rated as average (59%)
Portfolio Building -- Rated as average (41%)
Overall Rating: average (40%)

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 five asset SIB (Simpler Is Better) plan . This SIB plan has the following candidate index funds and their ETFs equivalent:

Fixed Income:( AGG or BND )
Foreign Equity:( EFA or VEU )
Emerging Market Equity:( EEM or VWO )
US Equity:( SPY or VTI )

Performance chart (as of Oct 15, 2010)

Performance table (as of Oct 15, 2010)

Portfolio Name	1Yr AR	1Yr Sharpe	3Yr AR	3Yr Sharpe	5Yr AR	5Yr Sharpe
Four Core Asset ETF Index Funds Emerging Markets Tactical Asset Allocation Moderate	2%	17%	6%	44%	14%	88%
Schwab Commission Efficient ETFs SGN Tactical Asset Allocation Moderate	1%	10%	5%	38%	12%	88%
Schwab Commission Efficient ETFs SGN Strategic Asset Allocation Moderate	10%	71%	1%	2%	9%	40%
Four Core Asset ETF Index Funds Emerging Markets Strategic Asset Allocation Moderate	10%	76%	1%	4%	8%	37%

The Schwab Funds perform adequately against the SIB’s.

TD Ameritrade (Ticker: AMTD) are also newcomers to the ETF space offering 100+ commission free ETFs. The main restriction is that customers have to hold these ETFs for more than 30 days to make such trades ecommission free.

This is an almost ideal platform for retirement investing with a 30 day redemption period. With a web based application to monitor all of the funds in the plan, it should be possible to put together a very solid portfolio and deliver excellent results.

These funds provide exposure to 6 major assets: Emerging Market Equity , Foreign Equity , Fixed Income , US Equity , Commodity , Real estate.

The list of minor asset classes covered:

Diversification -- Rated as great (97%)
Fund Quality -- Rated as below average (28%)
Portfolio Building -- Rated as great (90%)
Overall Rating: above average (73%)

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 five asset SIB (Simpler Is Better) plan . This SIB plan has the following candidate index funds and their ETFs equivalent:

Performance table (as of Oct 15, 2010)

Portfolio Name	1Yr AR	1Yr Sharpe	3Yr AR	3Yr Sharpe	5Yr AR	5Yr Sharpe
TD Ameritrade Commission Free ETFs Tactical Asset Allocation Moderate	13%	87%	13%	86%	20%	128%
TD Ameritrade Commission Free ETFs Strategic Asset Allocation Moderate	10%	83%	-1%	-6%	9%	46%
Six Core Asset ETFs Tactical Asset Allocation Moderate	10%	65%	9%	66%	17%	114%
Six Core Asset ETFs Strategic Asset Allocation Moderate	11%	84%	2%	9%	9%	42%

Currently, asset classes in REITs( IYR , VNQ , ICF ) , Fixed Income( AGG , BND ) and Emerging Market Equity( EEM , VWO ) are doing relatively well. These asset classes are available to TD Ameritrade Commission Free ETFs participants.

Comparing the two

Portfolio Performance Comparison

Portfolio Name	1Yr AR	1Yr Sharpe	3Yr AR	3Yr Sharpe	5Yr AR	5Yr Sharpe
TD Ameritrade Commission Free ETFs Tactical Asset Allocation Moderate	13%	87%	13%	86%	20%	128%
Schwab Commission Efficient ETFs SGN Tactical Asset Allocation Moderate	1%	10%	5%	38%	12%	88%
TD Ameritrade Commission Free ETFs Strategic Asset Allocation Moderate	10%	83%	-1%	-6%	9%	46%
Schwab Commission Efficient ETFs SGN Strategic Asset Allocation Moderate	10%	71%	1%	2%	9%	40%

In this round, TD Ameritrade is the clear winner with tactical asset allocation while the Schwab SAA pretty much matches its counterpart.

TD Ameritrade's two key advantages are:

A large number of ETF’s in six asset classes to allow the construction of high performance portfolios
Providing ETF’s with history from industry leading suppliers

TD Ameritrade is the clear winner and moves on to the final round.

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Dow Theory Revisited, Reviewed, Compared
10/08/2010

In this article we are going to revisit Dow Theory -- the grand-daddy of all portfolio strategies and then compare it with more modern approaches. We will look at Shiller, a long term but newer approach and then modern portfolio theory which is based on asset allocation.

The Dow Theory is one of the most venerable strategies. It uses the price trends of the Dow Jones Industrial index (^DJI) and the Dow Jones Transportation Index (^DJT) to decide whether to invest in the stock market.

The Dow Theory has been around for almost 100 years, yet even in today’s volatile and technology-driven markets, the basic components of Dow theory still remain valid. Developed by Charles Dow, refined by William Hamilton and articulated by Robert Rhea, the Dow Theory addresses not only technical analysis and price action, but also market philosophy. Many of the ideas and comments put forth by Dow and Hamilton became axioms of Wall Street.

Today, there are a variety of strategies

There are multiple interpretations of the original Dow Theory. This strategy represents a typical version: all the buy and sell signals are confirmed by both the Dow Jones Industrial Average and Dow Jones Transportation Average.

The Dow Jones Transportation Average is used to triangulate the Dow Jones Industrial Average to ensure that an upward or downward trend is not just a localized phenomenon.

The buy signal
- A primary low is established
- A secondary bounce
- A pullback of around 3% but above previous lows
- Both averages hold above the prior lows
- Both averages exceed the secondary bounce
The sell signal
- A primary high is established
- A secondary drop
- A rally of over 3% but falls short of the previous high
- A drop of both averages below the previous drop
The funds in the portfolio are (ETF alternatives):
- Wilshire 5000 total return index ^DWC (VTI, SPY, IWM)
- Cash (BND)
This is a long established strategy and should be reviewed to see how it performs in more recent operating conditions. To achieve this, we will compare results with another long term plan – Shiller, a modern portfolio (a 6 asset SIB with tactical asset allocation) and the total market (^DWC).

Click here for the interactive graph

Historical Returns for Dow Theory, Shiller and 6SIB TAA

Annual Returns 1 Year 3 Years 5 Years

Dow Theory -14% -12% -2%

Shiller 8% 16% 11%

6 SIB TAA 9% 10% 13%
The Dow Theory has not been effective in the last ten years given the prevailing market conditions. It is possible that a different investment portfolio would perform better but given that Shiller is using similar funds, Shiller appears to be a better choice.

Today, Dow Theory is signalling

Takeaways:
- Both the Dow Theory and Shiller are based on long term indices and both of them outperform the market
- Shiller performs better as we recover from the nightmare of the last few years
- Modern portfolio theory based on diversification and tactical asset allocation consistently outperforms the other strategies – within the measurement timeframe
labels:investment,
Symbols:VTI,SPY,IWM,BND,AGG,DBC,EEM,EFA,GSG,IYR,LQD,SHY,TLT,Bonds,Dollar/Currencies,Earnings,Economy,Hedge,Funds,

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Historical Returns for Dow Theory, Shiller and 6SIB TAA
Annual Returns	1 Year	3 Years	5 Years
Dow Theory	-14%	-12%	-2%
Shiller	8%	16%	11%
6 SIB TAA	9%	10%	13%

Bernstein's No Brainer and Smart Money Portfolios Reviewed

10/08/2010

Dr. William Bernstein is the author of the "Intelligent Asset Allocator" and "The Four Pillars of Investing." He's also a physician, neurologist and financial adviser to high-net-worth individuals.

He has proposed a number of lazy portfolios. There are two that will be examined today.

The smart money portfolio

The no-brainer portfolio

The no-brainer portfolio comprises the following fund allocation

25% in Vanguard 500 Index VFINX (IVW)
25% in Vanguard Small Cap NAESX or VTMSX (VB)
25% in Vanguard Total International VGTSX or VTMGX (EFA, VEA)
25% in Vanguard Total Bond VBMFX or VBISX (BND)

Things to note about the portfolio:

Heavily weighted towards domestic equities
Similar to a three asset SIB with domestic, international and fixed income
It would be better to have some REIT or emerging markets exposure
We will compare the no brainer portfolio to a three and four asset SIB

full chart

Annual returns	1 year	3 years	5 years
Bernstein No Brainer	10	-1	4
Bernstein Tactical Asset Allocation	-3	0	6
Four SIB Strategic Asset Allocation	14	-1	5
Three SIB Strategic Asset Allocation	8	-4	4
Three SIB Tactical Asset Allocation	-5	0	6

The Bernstein no-brainer tracks very closely with the four asset SIB. It’s interesting to note that the three asset Bernstein tracks closer to the four asset SIB than expected. So as a lazy portfolio, it performs satisfactorily. Year to date, however, the four asset SIB has better performance.

The tactical asset allocation strategies deliver better results with higher returns and lower volatility. The no brainer funds outperform the 3 asset SIB but underperform the 4 asset SIB which is to be expected.

The smart money portfolio comprises the following fund allocation

40% Vanguard Short Term Investment Grade VFSTX (SCJ, SHY)
15% Vanguard Total Stock Market VTSMX (VTI)
10% Vanguard Small Cap Value VISVX (VBR)
10% Vanguard Value Index VIVAX (VTV)
5% Vanguard Emerging Markets Stock VEIEX (VWO)
5% Vanguard European Stock VEURX (VEU)
5% Vanguard Pacific Stock VPACX (VPL)
5% Vanguard REIT Index VGSIX (RWX, VNQ)
5% Vanguard Small Cap Value NAESX or VTMSX (VB)

To summarize:

40% in US equities
10% in international equities
5% in emerging market equities
5% in REIT
40% in fixed income

Full comparison

Annual returns	1 year	3 years	5 years
Smart Money	10	-1	4
Smart Money Tactical Asset Allocation	-3	0	6
Five SIB Strategic Asset Allocation	14	-1	5
Five SIB Tactical Asset Allocation	8	-4	4
Four SIB Tactical Asset Allocation	-5	0	6

Although the smart money portfolio has five asset classes, international, emerging markets and real estate are so under-weighted that they act as if they are a single class so, again, it’s more like a three asset class portfolio. The five asset SIB with strategic asset allocation has similar behavioral properties but clearly delivers better results based on superior diversification.

One the strategy is moved over to tactical asset allocation, there are enough asset classes in the Bernstein portfolio for the Larger Chart

results to be clearly superior than a four asset SIB and close to the five asset SIB

We look at the two portfolios as a final comparison

Annual returns	1 year	3 years	5 years
Bernstein No Brainer	10	-1	4
Bernstein Smart Money	10	-1	4

They are remarkably close to each other full comparison

Takeaways

Tactical Asset Allocation reduces downside risk and that wins in the current uncertain environment
Both Bernstein portfolios perform satisfactorily for a lazy portfolio – it is surprising that the no-brainer performs so well against it’s more diversified smart-money cousin
ETF’s can readily be used to implement these portfolios with good performance

labels:investment,

Symbols:BND,BWX,CIU,CSJ,DBC,DVY,EFA,EFG,EFV,EMB,GLD,HYG,IEF,IEI,IJJ,IJK,LQD,MBB,QQQQ,RWX,SCZ,SHY,TIP,VB,VBK,VBR,VEA,VNQ,VO,VTI,VTV,VUG,VWO,WIP,Portfolio-Building,with,ETFs,Closed-End,Funds,Commodity,ETFs,Currency,ETFs,Developed,Market,ETFs,

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ALLERGAN, INC. SAVINGS AND INVESTMENT PLAN Report On 12/03/2010

12/03/2010

This report reviews ALLERGAN, INC. SAVINGS AND INVESTMENT 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 ALLERGAN, INC. SAVINGS AND INVESTMENT PLAN can achieve reasonable investment results using asset allocation strategies.

Plan Review and Rating

ALLERGAN, INC. SAVINGS AND INVESTMENT PLAN's 401K plan consists of 13 funds. These funds enable participants to gain exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income. The list of minor asset classes covered:

Foreign Large Blend: EFA, VEU, GWL, PFA
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
Moderate Allocation: AOM
Short Government: SHY, SHV, VGSH, PLK, USY
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 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 (21%)
Fund Quality -- Rated as (16%)
Portfolio Building -- Rated as (31%)
Overall Rating: (24%)

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 ALLERGAN, INC. SAVINGS AND INVESTMENT 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 3 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)
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
ALLERGAN, INC. SAVINGS AND INVESTMENT PLAN Tactical Asset Allocation Moderate	7%	61%	6%	65%	7%	69%
ALLERGAN, INC. SAVINGS AND INVESTMENT PLAN Strategic Asset Allocation Moderate	12%	118%	2%	8%	5%	29%
Three Core Asset ETF Index Funds Tactical Asset Allocation Moderate	-4%	-35%	1%	9%	4%	27%
Three Core Asset ETF Index Funds Strategic Asset Allocation Moderate	9%	60%	-0%	-3%	4%	13%

Currently, asset classes in US Equity (SPY,VTI), Foreign Equity (EFA,VEU) and Fixed Income (AGG,BND) are doing relatively well. These asset classes are available to ALLERGAN, INC. SAVINGS AND INVESTMENT PLAN participants.

To summarize, ALLERGAN, INC. SAVINGS AND INVESTMENT PLAN plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles.

Symbols: AGN , SPY , VTI , EFA , VEU , AGG , BND , AOM , CIU , BIV , GWL , PFA , IVE , IWW , JKF , VTV , ELV , PWV , RPV , SCHV , IVV , IYY , IWV , VV , DLN , RSP , SCHX , IOO , VT , SHY , SHV , VGSH , PLK , USY , IVW , IWZ , JKE , VUG , ELG , QQQQ , RPG , SCHG , IJS , IWN , JKL , VBR , DSV , PWY , RZV , UVT , IJR , IWM , JKJ , VB , DSC , PJM , DES , SAA , UWM , SCHA , IJT , IWO , JKK , VBK , DSG , PWT , RZG , UKK

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