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Articles on BND

  • Retirement Investments: Compared with Hedge Fund Performance

    11/08/2011

    The following is the newest October hot shot hedge fund performance data:

    HedgeWeekly2011_No45

     

    More specifically,

     Strategies/Portfolios  YTD (as of 10/31/2011)
     Fund of Funds - Diversifed
     -4.84%
     Diversified Macro
     -1.42%
     Global Macro
    -2.15%
     Six Core Asset ETF Strategic Asset Allocation Moderate  0.69%
    Six Core Asset ETF Tactical Asset Allocation Moderate -2.56%
    Permanent Portfolio Global trategic Asset Allocation Moderate 1%
    Permanent Portfolio Global Tactical Asset Allocation Moderate 2.13%

    Our Tactical Asset Allocation(TAA) is similar to Global macro hedge fund strategy. We can see that both Strategic Asset Allocation and Tactical Asset Allocation model portfolios are compared favorably with the hedge fund averages. 

    For more information, see Six Core Asset ETFs plan that has ONLY 6 broadbase ETFs (Vanguard low cost ETFs VTI, VEU, VNQ, VWO, BND and one Poweshares DB Commodities ETF DBC).

    Permanent Global Portfolio ETF Plan uses Gold (GLD), silver (SLV) and other ETFs to form a diversified hedging portfolio.

    Symbols: SPX, COMP, VTI, VEU, VNQ, VWO, BND, DBC, GLD, SLV, TLT, IYR, Retirement Investments, Hedge Funds, Asset Allocation

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  • Strategic and Tactical Allocation for Retirement Investments

    10/17/2011

    Strategic Asset Allocation(SAA) and Tactical Asset Allocation(TAA) can complement to each other. The following is a recent article Core Satellite Portfolios For Long-Term Investments published on SeekingAlpha.com that discussed this issue:

    "Recent market swings and weakness have proven to be difficult for both strategic and tactical asset allocation strategies. For a long-term investor who is concerned about his/her retirement investments, such as 401(k)s, IRAs, 403(b)s and variable annuity accounts, it is thus important to understand the strength and weaknes of the two common strategies.

    The concept of core satellite portfolio construction has been adopted for several years by many investment advisers, wealth managers and financial planners. The EDHEC has collected several papers detailing this concept."

    ......

    Read more on Core Satellite Portfolios For Long-Term Investments. 

    See the Core Satellite Six Core Asset ETFs 25 Core 75 Satellite portfolio and the comparison with strategic asset allocation and tactical asset allocation.

    Symbols: SPX, COMP, AGG, BND, DBC, EEM, EFA, GSG, IYR, SPY, VEU, VNQ, VTI, VWO, Retirement Investments, Portfolio Management, Asset Allocation

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  • 401K Investments: Alcoa Savings Plan Review

    10/11/2011

    Retirement investing is a long term process. This report reviews Alcoa Inc Savings Plan MTIA plan, discusses the 401k investment options and presents the plan rating by MyPlanIQ. Asset allocation investment portfolios are examined. Current economic and market conditions are discussed in the context of the investment portfolios in the plan. We will then show how plan participants in Alcoa Inc Savings Plan MTIA can achieve reasonable investment results using portfolio management and risk management strategies for their 401k investments.

    Plan Review and Rating

    Alcoa, Inc. engages in the production and management of aluminum, fabricated aluminum, and alumina. The company is the largest aluminum provider in the world. Alcoa, Inc. was founded in 1888 and is based in New York, New York.

    Alcoa Inc Savings Plan MTIA's 401K plan consists of 13 funds. These funds enable participants to gain exposure to 4 major assets: US Equity, Foreign Equity, Emerging Market Equity, Fixed Income.

     

    Asset Class Ticker Name
    LARGE GROWTH RAFCX American Funds AMCAP R3
    Moderate Allocation RLBFX American Funds American Balanced R5
    LARGE BLEND RICFX American Funds Invmt Co of Amer R5
    DIVERSIFIED EMERGING MKTS MGEMX Morgan Stanley Inst Emerging Mkts I
    WORLD STOCK RNPFX American Funds New Perspective R5
    Foreign Large Growth PRITX T. Rowe Price International Stock
    SMALL BLEND PASSX T. Rowe Price Small-Cap Stock Adv
    Moderate Allocation VGSTX Vanguard STAR Inv
    LARGE BLEND VITPX Vanguard Instl Ttl Stk Mkt Idx Instl Pls
    Intermediate-Term Bond VBMFX Vanguard Total Bond Market Index Inv
    MID-CAP BLEND VIEIX Vanguard Extended Market Idx Instl
    Small Growth MMCIX BNY Mellon Small/Mid Cap Inv
    Foreign Large Value MPITX BNY Mellon International M

    As of Oct 10, 2011, this plan investment choice is rated as average based on MyPlanIQ Plan Rating methodology that measures the effectiveness of a plan's available investment funds. It has the following detailed ratings:

    Diversification -- Rated as average (51%)
    Fund Quality -- Rated as average (45%)
    Portfolio Building -- Rated as above average (81%)
    Overall Rating: average (61%)

    On stock/equity side, it offers various styles (large, mid and small cap) stock funds. Some of those funds are of high quality (such as American Funds AMCAP R3). An excellent moderate allocation fund American Funds American Balanced R5 is available for anyone who prefers using one stop shop fund.

    On fixed income (bond) side, Alcoa's plan offers only one Vanguard total bond index fund (VBMFX) for its plan participants. This is an area that can be expanded.

    Current Economic and Market Conditions

    The U.S. and the rest of the world face long term structural problems that it takes time to correct. The following are some of these problems:

    • The consumption driven economies in developed countries and the export driven economies in emerging countries result in a one way trade flow that can only be sustained for a limited time.
    • Private households in the U.S. are highly in debt, mostly due to the Federal Reserve's loose monetary policy to prop up consumption and living standards. It is impossible to make debts go away overnight without inflicting severe social and economic hardship.
    • Sovereign debt is growing out of control in many countries due to years of relaxed fiscal policies and the recent stimulus driven rescue. It should be noted that this exists not only in developed countries but also in several emerging countries, noticeably in China (adding local government debt, the Chinese government debt would rival the US) and somewhat in Brazil.
    • Uneven productivity and competitiveness of work forces in developed countries and emerging countries. Both productivity and competitiveness can be simply measured by return on investment (ROI), or so called 'cost effectiveness'. We can see this uneven productivity from the difference between German workers and those in peripheral European countries as well as the difference between manufacture workers in the U.S. and those in emerging countries.
    • The relatively decline of K-12 education quality in the U.S., especially in science and technology, makes it more and more difficult for the country to be competitive in manufacturing and producing high tech goods.

    It takes time to correct structural problems as it requires fundamental changes in policies, improvements in productive investments (such as infrastructure upgrade), a better trained current work force and a future generation that is better equipped in science and technology. All this will take time.

    In such an environment, it is key to have proper asset allocation in place for one's retirement investment portfolios.

    Asset Class Trends

    The following table shows how major asset classes such as US equity (stocks), foreign equity, emerging market equity, Real Estate Investment Trusts (REITs), commodities and fixed income (bonds) are ranked based on their price momentum.

    Assets Class Symbols 10/10
    Trend
    Score
    10/03
    Trend
    Score
    Direction
    Gold GLD 7.88% 8.29% v
    Intermediate Treasuries IEF 3.76% 7.81% v
    Municipal Bonds MUB 2.29% 3.67% v
    Total US Bonds BND 2.05% 3.57% v
    Mortgage Back Bonds MBB 1.45% 2.43% v
    US Credit Bonds CFT 1.4% 2.41% v
    International Treasury Bonds BWX 0.87% -1.35% ^
    Treasury Bills SHV 0.05% 0.01% ^
    Emerging Mkt Bonds PCY -0.27% -0.92% ^
    US Stocks VTI -0.74% -10.36% ^
    US High Yield Bonds JNK -0.86% -5.7% ^
    US Equity REITs VNQ -3.32% -11.9% ^
    Commodities DBC -3.68% -8.09% ^
    International Developed Stks EFA -4.28% -14.26% ^
    International REITs RWX -5.45% -13.89% ^
    Emerging Market Stks VWO -10.26% -20.42% ^
    Frontier Market Stks FRN -10.66% -19.69% ^

    For more information on the trends of major asset classes, please see Asset Class Trend Watch

     

    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 Oct 10, 2011)

    Performance table (as of Oct 10, 2011)

    Currently Fixed Income, Cash and International Bonds are doing well. Only one fixed income bond fund VBMFX is available to Alcoa Inc Savings Plan MTIA participants.

    To summarize, participants adopting Alcoa Inc Savings Plan MTIA plan can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles. Diversification and proper risk management are the two major key factors in 401k investing.

    Symbols: AA, SPX, COMP, VTI, VEU, VWO, BND, RAFCX, RLBFX, RICFX, MGEMX, RNPFX, PRITX, PASSX, VGSTX, VITPX, VBMFX, VIEIX, MMCIX, MPITX, 401K Investments, Portfolio Management, Retirement Investing

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  • Retirement Investments: Right Expectations at The Right Time

    09/23/2011

    Global stock market has entered a bear market, based on a Bloomberg report Global Stocks Drop 20% Into Bear Market as Debt Crisis Outweighs Profits. For many investors who are managing their retirement investments such as 401K, it is a high time to review and set a proper expectation.

    Chuck Jaffe at MarketWatch.com reported that Rob Arnott of Research Affiliates told financial advisers to reshape their return expectations dramatically for the coming decade and beyond.

    Arnott outlined the following:

      Last 30 Years Average Annual Return Coming Decade Expected Return
    Stocks (S&P 500 Total Return) 11% 4-6%
    Bonds 9% 2-4%

     

     

     

     

    He further suggested "investors will need to be increasingly tactical, trading into markets that are unloved and undervalued and being prepared to leave markets that have gotten overheated, and considering alternative strategies that can supplement the baseline stock and bond market returns."

    Given an extremely high possibility that we are entering the second recession, investors should have an investment plan in place for their retirement investments. In addition to Tactical Asset Allocation(TAA), one should stick to

    1. Diversification: not only this reduces risk, it also gives you more opportunities to extract returns elsewhere. In addition to stocks (SPX) and bonds (AGG), asset classes such as Real Estate Investment Trusts (REITs) and Commodities including precious metals (Gold GLD)
    2. Tactical or Alternative strategy driven ETFs or mutual funds. In this area, however, investors should again have a solid fund selection algorithm to weed out under performing funds or strategies.

    However, a proper risk tolerated strategic asset allocation portfolio should always have a place in one's overall portfolios (only a portion instead of all in such a portfolio). Periodically rebalancing will allow investors to capture the bigger future return of undervalued stocks or other asset classes.

    See Six Core Asset ETFs for an example of diversification and tactical asset allocation. It uses only 6 diversified major asset ETFs.

    Symbols: SPX, COMP, GLD, VTI, EFA, EEM, IYR, DBC, SLV, AGG, BND, Retirement Investments, Portfolio Management, Risk Management, Tactical Asset Allocation

     

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  • 403B Investments: University of California Retirement Savings Program Review

    09/16/2011

     

    University of California systems is the largest public university system in the nation. It provides its faculties and staff 457(b) deferred compensation, defined contribution and 403(b) tax deferred plans with UC Core Funds and a set of supplemental low cost funds from Vanguard, Dimensional Funds and Dreyfus. Please refer to its annual report of June 2010 for more information.

    This report reviews University of California Retirement Savings Program plan. We discuss its investment options and presents the plan rating by MyPlanIQ. Asset allocation investment portfolios are examined. We then show how plan participants in University of California Retirement Savings Program can achieve reasonable investment results using portfolio management and risk management strategies for their 401k investments.

    We form University of California Retirement Savings Program using funds reported in the annual report. UC Core funds are represented by corresponding Vanguard index funds as proxies.

    The plan consists of 15 funds. These funds enable participants to gain exposure to 5 major assets: US Equity, Foreign Equity, REITs, Emerging Market Equity, Fixed Income.

     

    Asset Class Ticker Name
    SMALL BLEND VSMAX Vanguard Small Cap Index Adm
    DIVERSIFIED EMERGING MKTS DFEMX DFA Emerging Markets I
    REAL ESTATE VGSLX Vanguard REIT Index Adm
    LARGE GROWTH VFTSX Vanguard FTSE Social Index Inv
    ROOT CASH CASH
    Short-Term Bond VBISX Vanguard Short-Term Bond Index Inv
    Intermediate-Term Bond VBTLX Vanguard Total Bond Market Index Adm
    SHORT GOVERNMENT STABLEVALUE STABLEVALUE
    LARGE BLEND IWV iShares Russell 3000 Index
    LARGE BLEND VFINX Vanguard 500 Index Investor
    Foreign Large Blend EFA iShares MSCI EAFE Index
    Inflation-Protected Bond VIPSX Vanguard Inflation-Protected Secs Inv
    Moderate Allocation CFUNX C/Funds:C/Fund

    As of Sep 15, 2011, this plan investment choice is rated as average based on MyPlanIQ Plan Rating methodology that measures the effectiveness of a plan's available investment funds. It has the following detailed ratings:

    Diversification -- Rated as above average (84%)
    Fund Quality -- Rated as below average (24%)
    Portfolio Building -- Rated as above average (78%)
    Overall Rating: average (64%)

    The plan has a good diversification score as it covers the five major asset classes. In the US stock asset class, it has small and large cap style funds. All of these are low cost index funds.

    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 Sep 15, 2011)

    Performance table (as of Sep 15, 2011)

    In the last 5 year time span, the UC Plan beats the SIB 5 core portfolios in both strategic and tactical asset allocation categories. This indicates that extra minor asset classes (such as small/large cap) do provide additional opportunities for better portfolio management and risk management.

    To summarize, participants in University of California Retirement Savings Program plan can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles. Diversification and proper risk management are the two major key factors in retirement investments (in this case, 403b investments).

    Symbols: SPX, QQQQ, IWV, EFA, VTI, VEU, VWO, VNQ, BND, VSMAX, DFEMX, VGSLX, VFTSX, VBISX, VBTLX, VFINX, VIPSX, CFUNX, FSLBX, Retirement Investments, 403b Investments, Portfolio Management, Risk Management

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  • 401K Investments: Moody's Profit Participantion Plan Offers Good Diversification and Quality Funds

    09/14/2011

  • Portfolio Management: Black Swan Tail Insurance vs. Tactical Asset Allocation

    09/13/2011

  • Black Swan Tail Insurance and Tactical Asset Allocation

    09/13/2011

  • 401K Investments: Southwest Airlines Should Expand Its Horizon for Their Employees' 401k Plan

    09/12/2011

  • More Can Be Done by Financial Advisors

    09/10/2011

  • Why 'Buy and Hold' Strategy No Longer Works?

    08/19/2011

  • 5 Assets for a Global Banking Crisis?

    08/17/2011

  • How Money Manager Franklin Templeton Selects Funds for Its Employee Profit Sharing 401K Plan

    08/13/2011

  • 5 Steps to Take When Your Company's Pension Is Underfunded

    08/09/2011

  • Using Asset Classes in Amerivest Guided Portfolios to Construct ETF Portfolios

    07/22/2011

  • Two Factors That Make Picking Stocks So Hard

    07/08/2011

  • Beating The Market Is Easy: Just Make Lots of Noise To Confuse

    06/27/2011

  • H&R Block Can Use Its Financial Prowess to Help Its Own 401K Plan

    06/24/2011

  • Target Date Funds, Balanced Funds or Your Own ETF/Index Fund Portfolios

    06/23/2011

  • High Quality Funds in Oracle 401K Plan Boost Portfolio Returns

    06/13/2011

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