 |
Vanguard ETF: |  |
7.4%* |
|
Diversified Core: | |
8.1%* |
|
Six Core Asset ETFs: | |
7.3%* |
Articles on K
- Kellogg Old Style 401K -- Good Funds -- Not Enough Diversity
04/22/2011
Spring is here and summer isn't far away -- where does the time go? Already this year we have seen uprisings, natural and man made disasters, Tax season has come and gone and the Royal Wedding is everywhere and will soon be gone. How many of our New Year's resolutions are still intact? The tyranny of the urgent may tempt us to delay until disaster strikes and the cost to repair, dwarfs the cost to prevent. Many working people put off their retirement investing -- just one more year until it has becomes a "hair on fire" problem.
The problem is that we can easily be overwhelmed and shut down. The way to solve this is to focus on what works in the long term -- that is what long term investing is all about -- and allow that to filter out what may work in the short term but won't stand the test of time.
We continue to examine different portfolios to see what we can learn and use to further our investment portfolios. Today we look at the retirement plan from the venerable Kellogg company.
Kellogg 401k Plan's 401K plan consists of 9 funds. These funds enable participants to gain exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income.
We contrast this with our Six Core Asset ETF Benchmark's benchmark plan which consists of 6 funds. These funds enable participants to gain exposure to 6 major assets: US Equity, Commodity, Foreign Equity, REITs, Emerging Market Equity, Fixed Income.
The list of minor asset classes covered by Kellogg 401k Plan The list of minor asset classes covered by Six Core Asset ETF Benchmark Equity: K
Foreign Large Blend: RERFX
Intermediate-term Bond: PTTRX
Large Blend: SVSPX
Large Growth: PRGFX
Large Value: VWNAX
Small Growth: VEXRX
Small Value: DFSVX
Other: CASHCommodities Broad Basket: DBC
Diversified Emerging Mkts: VWO
Foreign Large Blend: VEU
Intermediate-term Bond: BND
Large Blend: VTI
Real Estate: VNQAsset Class Kellogg 401k Plan Six Core Asset ETF Benchmark REITs 0 1 Fixed Income 1 1 Commodity 0 1 Sector Fund 0 0 Foreign Equity 1 1 Emerging Market Equity 0 1 US Equity 6 1 Other 1 0 Total 9 6 As of Apr 21, 2011, Kellogg 401k Plan investment choice is rated as average and Six Core Asset ETF Benchmark investment choice is rated as 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:
Attribute Kellogg 401k Plan Six Core Asset ETF Benchmark Diversification below average (13%) average (62%) Fund Quality great (99%) average (53%) Portfolio Building below average (16%) above average (72%) Overall Rating average (40%) average (63%)
Both plans are simple -- having between six and nine funds. The lack of funds in the benchmark plan will be compensated by its breadth of diversification. We would expect the Kellogg plan to do well when US and international equities are doing well as they have great funds. However, when help is needed from other asset classes -- commodities and real estate for an example, the benchmark plan should win out.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:
Performance charts (as of Apr 21, 2011)
Three Month Chart
Over three months, the plans are running neck and neck. The richness of the US equity choices in the Kellogg plan offsets the lack of commodity, real estate and emerging market equities that are shoring up the weakness in international equities.
One Year Chart
Over a year's period, we see that the Kellogg TAA plan is struggling -- all three asset class TAA plans have struggled over the last year as there hasn't been a strong trend. The six asset class benchmark is the leader with strong contributions from many of the asset classes.
Three Year Chart
Once we see the impact of the sharp downturn that caused our current problems, you can see the benefit of a TAA strategy -- moving to cash means that you avoid many of the losses. However, without additional asset classes, the buy and hold strategies can catch up as the economies rebound. Note that the six asset class is still the leader.
Five Year Chart
Over the longer period, it's possible to see where the broader asset class exposure in Real Estate, Emerging markets and commodities can bring more to the table and help improve returns.
Performance table (as of Apr 21, 2011)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Kellogg 401k Plan Tactical Asset Allocation Moderate -1% -8% 5% 54% 6% 57% Kellogg 401k Plan Strategic Asset Allocation Moderate 12% 92% 5% 29% 6% 36% Six Core Asset ETF Benchmark Tactical Asset Allocation Moderate 11% 82% 9% 76% 13% 87% Six Core Asset ETF Benchmark Strategic Asset Allocation Moderate 15% 121% 4% 20% 7% 34% Currently Commodities, Emerging Market and Real Estate are doing well. But these asset classes are not available to Kellogg 401k Plan participants. Fortunately, US equities are also doing well and that is what brings reasonably strong returns to the portfolio in the short term.
To summarize, Kellogg 401k Plan 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 Foreign Equity funds. With either plan, augmenting a retirement portfolio with emerging market equities and commodities will provide better diversification and likely higher risk adjusted returns. As inflation seems like a near certainty, commodity exposure becomes increasingly important.
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.
- 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.
labels:investment,
Symbols:AGG,AOK,AOM,BIV,BND,CIU,DLN,DRF,EFA,ELG,ELV,GWL,IEI,IPF,ITE,IVE,IVV,IVW,IWV,IWW,IWZ,IYF,IYY,JKE,JKF,K,PFA,PFI,PLK,PWV,QQQQ,RPG,RPV,RSP,RYF,SCHG,SCHV,SCHX,SHV,SHY,SPY,TZD,TZE,TZI,TZO,UAUA,USY,VEU,VFH,VGIT,VGSH,VTI,VTV,VUG,VV,
- United Airlines 401K Flies Above the ETF Benchmark, But Below Kellogg
11/12/2010
United Airlines (UAUA) Flight Attendant 401(k) Plan's 401K plan consists of 22 funds. These funds enable participants to gain exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income.
Summary
US Equity 7 funds (including company stock)
International Equity 2 funds
Balanced Funds 4 funds
Fixed income 3 fund
Target date 6 fundsIf the company's stock is excluded (better left for an employee stock purchase plan) as well as the target date funds (which can't be effectively leveraged in a portfolio), the participant is left with 15 funds in three asset classes.
We compare this with the Kellogg (K) plan, which has three asset classes -- so that we can see what contributes to higher performance portfolio. In this case, Kellogg only has seven funds with a very limited choice in fixed income and international asset classes.
Asset Class United Airlines Kellogg U.S. Equity Excluding Company Stock 6 5 International Equity 2 1 Balanced Funds 4 Fixed Income 3 1 Target Date 6
The list of minor asset classes covered:Conservative Allocation: AOK
Financial: IYF, VFH, IPF, PFI, DRF, RYF
Foreign Large Blend: EFA, VEU, GWL, PFA
Intermediate Government: IEI, VGIT, ITE
Intermediate-term Bond: AGG, CIU, BIV, BND
Large Blend: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX
Large Growth: IVW, IWZ, JKE, VUG, ELG, QQQQ, RPG, SCHG
Large Value: IVE, IWW, JKF, VTV, ELV, PWV, RPV, SCHV
Moderate Allocation: AOM
Retirement Income:
Short Government: SHY, SHV, VGSH, PLK, USY
Target Date 2000-2010: TZD
Target Date 2011-2015: TZE
Target Date 2021-2025: TZI
Target Date 2031-2035: TZO
Target Date 2041-2045:
Us Equity: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHXAs of Nov 8, 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. We compare the detailed ratings with the Kellogg plan.
Plan Rating Attribute United Airlines Kellogg Diversification 43% 13% Fund Quality 20% 99% Portfolio Building 42% 47% Overall Rating 35% 53% The key difference between the two plans is that the United plan has more lower quality funds, whereas the Kellogg plan has fewer higher quality plans. In the end, the Kellogg plan wins the ratings battle, but we should wait to see what that means in returns.
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 purposes, 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 BNDPerformance chart (as of Nov 8, 2010)
click to enlarge
Performance table (as of Nov 8, 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 8% 71% 6% 62% 10% 94% United Airlines Flight Attendant 401(k) Plan Strategic Asset Allocation Moderate 10% 103% 0% -3% 5% 30% Three Core Asset ETF Index Funds Tactical Asset Allocation Moderate 2% 19% 3% 29% 5% 48% Three Core Asset ETF Index Funds Strategic Asset Allocation Moderate 13% 106% 1% 3% 5% 21%
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 United Airlines Flight Attendant 401(k) Plan participants.The United plan outperforms the 3 Asset SIB (as did the Kellogg plan), let's now see how the two plans compare directly.
Performance chart (as of Nov 8, 2010)
Performance table (as of Nov 8, 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 8% 71% 6% 62% 10% 94% United Airlines Flight Attendant 401(k) Plan Strategic Asset Allocation Moderate 10% 103% 0% -3% 5% 30% Kellogg 401k Plan Tactical Asset Allocation Moderate 4% 35% 4% 42% 8% 73% Kellogg 401k Plan Strategic Asset Allocation Moderate 15% 115% 3% 15% 8% 45% The Kellogg portfolios outperform the United portfolios based on superior fund quality.
To summarize, United Airlines Flight Attendant 401(k) Plan plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles.
Improving the number of asset classes and quality of funds would enable portfolios to deliver better returns.
labels:investment,
Symbols:AGG,AOK,AOM,BIV,BND,CIU,DLN,DRF,EFA,ELG,ELV,GWL,IEI,IPF,ITE,IVE,IVV,IVW,IWV,IWW,IWZ,IYF,IYY,JKE,JKF,K,PFA,PFI,PLK,PWV,QQQQ,RPG,RPV,RSP,RYF,SCHG,SCHV,SCHX,SHV,SHY,SPY,TZD,TZE,TZI,TZO,UAUA,USY,VEU,VFH,VGIT,VGSH,VTI,VTV,VUG,VV,
- Aflac Incorporated 401(k) Savings and Profit Sharing Plan Report On 12/03/2010
12/03/2010
This report reviews Aflac Incorporated 401(k) Savings and Profit Sharing 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 Aflac Incorporated 401(k) Savings and Profit Sharing Plan can achieve reasonable investment results using asset allocation strategies.
Plan Review and Rating
AFLAC Inc (Ticker:AFL) has the "Aflac Incorporated 401(k) Savings and Profit Sharing Plan".
Aflac Incorporated 401(k) Savings and Profit Sharing Plan's 401K plan consists of 11 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
Mid-cap Growth: IJK, IWP, VOT, EMG, PWJ, RFG, UKW
Moderate Allocation: AOM
Small Growth: IJT, IWO, JKK, VBK, DSG, PWT, RZG, UKK
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 (35%)
Fund Quality -- Rated as (33%)
Portfolio Building -- Rated as (36%)
Overall Rating: (35%)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 Aflac Incorporated 401(k) Savings and Profit Sharing 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 Aflac Incorporated 401(k) Savings and Profit Sharing Plan Tactical Asset Allocation Moderate 4% 34% 5% 64% 8% 81% Aflac Incorporated 401(k) Savings and Profit Sharing Plan Strategic Asset Allocation Moderate 10% 100% 2% 8% 6% 31% 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 Aflac Incorporated 401(k) Savings and Profit Sharing Plan participants.
To summarize, Aflac Incorporated 401(k) Savings and Profit Sharing Plan plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles.
Symbols: AFL , 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 , IVW , IWZ , JKE , VUG , ELG , QQQQ , RPG , SCHG , IJK , IWP , VOT , EMG , PWJ , RFG , UKW , IJT , IWO , JKK , VBK , DSG , PWT , RZG , UKK
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