 |
Vanguard ETF: |  |
7.4%* |
|
Diversified Core: | |
8.1%* |
|
Six Core Asset ETFs: | |
7.3%* |
Articles on PFF
- Tactically Manage An Income Producing Portfolio With Commodity Exposure
03/25/2011
Coming out of the great recession, governments around the world have adopted loose monetary policies to prop up the economies. These include U.S. central bank's QE2 (Quantitative Easing act 2) and Euro Zone's bailout of troubling peripheral countries like Greece. The current natural disasters in Japan and other countries can only add more demand for the stimulus. These policies resulted in commodity hoarding, especially in material hungry emerging economies such as China.
It is critical to have anti-inflation anti-currency devaluation component. In this article, we explore the feasibility of adding commodity exposure to an income producing portfolio. Commodity ETFs are effective tools to cope with the current situations. In a portfolio that is designed to preserve capital for retirement needs. However, because of volatile and somewhat dangerous nature of commodites, one needs to actively manage such a portfolio by adopting tactical asset allocation strategies.
Income producing ETFs such as high yield stock ETFs and bond ETFs can be used to build a lower risk portfolio for retirement income producing purpose. We study the two plans: one is without commodity exposure and the other one with the exposure.Retirement Income ETFs with Commodities plan is an extension to Retirement Income ETFs: adding extra commodity asset class with PowerShares DB Commodity Index (DBC) and GreenHaven Continuous Commodity (GCC). This plan consists of 37 funds. These funds enable investors to gain exposure to 6 major assets: US Equity, Commodity, Foreign Equity, Emerging Market Equity, REITs, Fixed Income. Compared with Retirement Income ETFs, this plan has two additional ETFs that represent the extra commodity asset class.
The following is the list of the candidate ETFs in the Retirement Income ETFs with Commodities:
The list of minor asset classes covered by Retirement Income ETFs with Commodities Commodities Broad Basket: DBC, GCC
Diversified Emerging Mkts: EEM, VWO, DEM
Emerging Markets Bond: EMB, PCY
Foreign Large Value: PID, IDV
Global Real Estate: RWX
High Yield Bond: HYG
Inflation-protected Bond: TIP
Intermediate Government: IEI
Intermediate-term Bond: CIU, CORP, MBB
Large Blend: VIG
Large Value: DVY, SDY, VYM, FVD
Long Government: IEF, TLT
Long-term Bond: LQD, VCLT
Mid-cap Value: PEY
Miscellaneous Sector: PFF
Muni National Long: MUB
Muni Short: SHM
Real Estate: IYR, ICF, VNQ
Short Government: SHY
Short-term Bond: CSJ, VCSH
World Bond: BWX, WIPAs of Mar 24, 2011, Retirement Income ETFs with Commodities investment choice is rated as and Retirement Income ETFs 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:
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).
Performance chart (as of Mar 24, 2011)
Performance table (as of Mar 24, 2011)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Retirement Income ETFs with Commodities Tactical Asset Allocation Moderate 10% 79% 8% 68% 11% 83% Retirement Income ETFs with Commodities Strategic Asset Allocation Moderate 11% 97% 1% 4% 4% 20% Retirement Income ETFs Tactical Asset Allocation Moderate 7% 40% 8% 65% 10% 62% Retirement Income ETFs Strategic Asset Allocation Moderate 11% 69% 3% 14% 5% 17% Discussions:
1. Commodity ETFs are volatile. In fact, PowerShare DB Commodity Index ETF (DBC) lost 32% in 2008 while iShares S&P GSCI Commodity Index (GSG) lost a whopping 46% in the same year.
2. Simply adding commodity ETFs to a strategic asset allocation portfolio (buy and hold with regular rebalancing) did not improve the returns in the past five years. This is again due to the big loss incurred in commodtiy ETFs.
3. Adding commodity ETFs as fund candidates in a tactical asset allocation portfolio, however, can improve returns. In the past five years, Retirement Income ETFs with Commodities Tactical Asset Allocation Moderate had extra 1% annualized return over Retirement Income ETFs Tactical Asset Allocation Moderate.
In conclusions. commodity ETFs are effective tools to cope with the current situations. In a portfolio that is designed to preserve capital for retirement needs. However, because of volatile and somewhat dangerous nature of commodites, one needs to actively manage such a portfolio by adopting tactical asset allocation strategies.
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.
Symbols:DBC,GCC,GSG,EEM,VWO,DEM,EMB,PCY,PID,IDV,RWX,HYG,TIP,WIP,IEI,CIU,CORP,MBB,VIG, DVY,SDY,VYM,FVD,IEF,TLT,LQD,VCLT,PEY,PFF,MUB,SHM,IYR,ICF,VNQ,SHY,CSJ,VCSH,BWX,
Exchange Tickers: (DBC),(GCC),(GSG),(EEM),(VWO),(DEM),(EMB),(PCY),(PID),(IDV),(RWX),(HYG),(TIP),(WIP),(IEI),(CIU),(CORP),(MBB),(VIG),(DVY),(SDY),(VYM),(FVD),(IEF),(TLT),(LQD),(VCLT),(PEY),(PFF),(MUB),(SHM),(IYR),( ICF),(VNQ),(SHY),(CSJ),(VCSH),(BWX)
- Schwab ETF Select List Plan Offers Diversification and High Quality Fund Selection
03/16/2011
by Kevin Carr, A MyPlanIQ Expert User
On March 9, 2011, Charles Schwab announced the release of the ETF Select List. The quarterly Schwab ETF Select List was created by Charles Schwab Investment Advisory, Inc. and is a filtered list of all of the ETFs in the marketplace, highlighting pre-screened, low-cost ETFs. Schwab used quantitative and qualitative screens to filter each ETF and build the list, covering 6 major asset categories and 45 minor asset categories. All ETFs, including Schwab ETFs, are evaluated using the same criteria and broken into sectors for US Equity, Foreign Equity, Emerging Market Equity, Fixed Income, Commodity and REITs.
The ETF Select List gives investors a choice of low-cost, pre-screened ETFs. Schwab highlights just one ETF in each category, chosen based on specific criteria including expense ratio, risk, structure and how well it fits into its category. To make the list, an ETF has to meet minimum criteria that include assets under management, including narrowness of index, trading volume, bid/ask volatility, risk, annualized cost of ownership, fund structure and fit within a given category. The list excludes exchange-traded notes (ETNs), inverse or leveraged ETFs, actively managed ETFs, and unmanaged baskets of securities.
While the ETF Select List has only been out a few days, I constructed a plan on MyPlanIQ platform. The Schwab ETF Select List has no redemption periods, is commission efficient and offers low expenses.
As of March 13, the Schwab ETF Select List Plan has a four star investment menu rating with a 99% diversification score and an overall above average investment choice based on MyPlanIQ Plan Rating methodology . The Plan Rating methodology is designed to measure how effective a plan’s available funds are using key factors such as diversification, fund quality and portfolio building.
Attribute Schwab ETF Select List Six Core Asset ETF Benchmark Diversification great (99%) average (63%) Fund Quality above average (70%) below average (23%) Portfolio Building average (53%) above average (70%) Overall Rating above average (72%) average (54%) 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
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 Mar 15, 2011)Performance table (as of Mar 15, 2011)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Schwab ETF Select List Tactical Asset Allocation Moderate 9% 88% 6% 57% 12% 91% Schwab ETF Select List Strategic Asset Allocation Moderate 11% 114% 3% 15% 4% 19% Six Core Asset ETF Benchmark Tactical Asset Allocation Moderate 9% 86% 8% 65% 12% 88% Six Core Asset ETF Benchmark Strategic Asset Allocation Moderate 12% 113% 4% 17% 6% 32% Currently Commodities, Real Estate and US Equity are doing well. These asset classes are available to Schwab ETF Select List participants.
To Summarize, Schwab ETF Select List Plan offers wide diversification, high quality funds with low expenses. compared with other brokerage supported ETF plans, it is very favorable. From time to time, we will review the plan.
Symbols:DBC,DBA,IAU,DBB,USL,PFF,VNQ,XLY,XLP,XLE,XLF,XLV,XLI,XLB,XLK,IYZ,XLU,BND,SCHO,SCHR,TLH,SCHP,CIU,JNK,BWX,MUB,SCHF,EFG,EFV,SCHC,SCHE,VEU,VT,VGK,VPL,EWJ,GXC,SCHX,SCHG,SCHV,VO,VOT,VOE,SCHA,VBK,VBR,SCHB,VYM,
Symbols (exchange): (DBC),(DBA),(IAU),(DBB),(USL),(PFF),(VNQ),(XLY),(XLP),(XLE),(XLF),(XLV),(XLI),(XLB),(XLK),(IYZ),(XLU),(BND),(SCHO),(SCHR),(TLH),(SCHP),(CIU),(JNK),(BWX),(MUB),(SCHF),(EFG),(EFV),(SCHC),(
SCHE),(VEU),(VT),(VGK),(VPL),(EWJ),(GXC),(SCHX),(SCHG),(SCHV),(VO),(VOT),(VOE),(SCHA),(VBK),(VBR),(SCHB),(VYM) - Riding High with Global Economy, International REITs Offer Currency and Inflation Hedge
03/10/2011
Among dividend paying equity ETFs, REITs continue to out perform other dividend stock ETFs. Both international (RWX) and US REITs (IYR, VNQ) are ranked at the top two spots in the following trend score table. This trend has lasted several months now. For more detailed performance, please refer to here.
Assets Class Symbols 03/09
Trend
Score03/02
Trend
ScoreDirection SPDR DJ Wilshire Intl Real Estate RWX 9.74% 10.04% v iShares Dow Jones US Real Estate IYR 9.61% 10.0% v SPDR S&P 500 SPY 9.41% 10.12% v Vanguard Dividend Appreciation VIG 9.2% 9.09% ^ Vanguard High Dividend Yield Indx VYM 9.15% 9.39% v iShares Dow Jones Select Dividend Index DVY 8.42% 7.38% ^ First Trust Value Line Dividend Index FVD 8.22% 7.75% ^ WisdomTree Emerging Market Equity Income DEM 8.12% 7.59% ^ iShares Dow Jones Intl Select Div Idx IDV 8.05% 9.23% v SPDR S&P Dividend SDY 7.95% 7.14% ^ PowerShares Intl Dividend Achievers PID 7.84% 9.12% v PowerShares HighYield Dividend Achievers PEY 7.11% 6.33% ^ iShares MSCI EAFE Index EFA 6.48% 8.35% v iShares MSCI Emerging Markets Index EEM 6.3% 5.21% ^ iShares S&P U.S. Preferred Stock Index PFF 3.38% 3.4% v The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).
International REITs (RWX, DRW, IFGL) have risen along with global economic recovery. The sector suffered staggering loss in 2008: SPDR Dow Jones Intl Real Estate (RWX) had 51% loss, WisdomTree International Real Estate (DRW) -57% and iShares FTSE EPRA/NAREIT Dev Real Estate(IFGL) -52%. Since then, the sector has recovered dramatically, though from the following table, they still have negative annual returns in the last 3 years.
As of 3/04/2011Description Symbol 1 Yr 3 Yr 5 Yr Avg. Volume(K) 1 Yr Sharpe SPDR Dow Jones Intl Real Estat RWX 24.45% -3.57% NA 312 106.56% iShares FTSE EPRA/NAREIT Dev Real Estate IFGL 13.32% -5.29% NA 66 65.6% SPDR Dow Jones Global Real Estate RWO 27.78% NA NA 71 144.86% iShares S&P Dev ex-US Property WPS 16.81% -4.01% NA 20 79.7% WisdomTree International Real Estate DRW 22.25% -3.97% NA 32 99.26%
In the current economic cycle, barring from an abrupt economic slowdown, international REITs offer the following advantages:
- They offer international diversification, both among risk equity assets and REITs.
- They offer inflation hedge: traditionally, REITs are reasonably anti-inflation: as landlords, the real estate operators can raise rents when inflation rises.
- They offer dollar hedge: in the era of dollar depreciation due to high debt in the U.S., REITs abroad make perfect sense.
Fund Country Weights As of 03/08/2011 Japan 18.45% Australia 18.36% United Kingdom 13.42% Hong Kong 12.74% France 9.35% Canada 9.15% Singapore 7.09% Austria 2.30% Netherlands 2.21% Switzerland 2.13% The top two countries Japan and Australia have strong currencies agaist U.S. dollars. This does bode well with the long term dollar weakness.
In conclusions, international REITs offer several advantages in building a portfolio. As always, the view should be taken in an overall asset allocation strategy. This is especially true in today's highly overvalued and overbought markets.
Symbols: RWX,SPY,IYR,VIG,IDV,VYM,EEM,PID,EFA,FVD,DVY,PEY,SDY,PFF,
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.
- Dividend ETFs: Public REITs Offer Good Value While Economy Recovers
03/04/2011
Dividend ETFs performed well last week: leading the pack are the emerging market stocks (EEM) and emerging market dividend stocks (DEM), gaining 2.38% and 1.9% respectively. International REITs also did well, gaining 2.04%. For more detailed performance, please refer to here.
Among dividend ETFs, publicly traded REITs (IYR, ICF, VNQ) continue their strong showing: International REITs (RWX) rose most, now placed on the second spot while U.S. REITs ranked the 3rd in our weekly trend table for dividend REITs.Assets Class Symbols 03/02
Trend
Score02/23
Trend
ScoreDirection SPDR S&P 500 SPY 10.12% 10.71% v SPDR DJ Wilshire Intl Real Estate RWX 10.04% 9.42% ^ iShares Dow Jones US Real Estate IYR 10.0% 11.56% v Vanguard High Dividend Yield Indx VYM 9.39% 10.08% v iShares Dow Jones Intl Select Div Idx IDV 9.23% 9.51% v PowerShares Intl Dividend Achievers PID 9.12% 8.54% ^ Vanguard Dividend Appreciation VIG 9.09% 9.73% v iShares MSCI EAFE Index EFA 8.35% 8.21% ^ First Trust Value Line Dividend Index FVD 7.75% 7.75% v WisdomTree Emerging Market Equity Income DEM 7.59% 6.27% ^ iShares Dow Jones Select Dividend Index DVY 7.38% 7.37% ^ SPDR S&P Dividend SDY 7.14% 7.22% v PowerShares HighYield Dividend Achievers PEY 6.33% 6.16% ^ iShares MSCI Emerging Markets Index EEM 5.21% 3.79% ^ iShares S&P U.S. Preferred Stock Index PFF 3.4% 3.29% ^ The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).
The publicly traded REITs have been strong since the beginning of 2010. These commercial property management companied came out of the great recession with several advantages:- They were able to access to low interest rate capital. According to NAREIT, public REITs raised $47 billion in 2010, almost reached to the record capital raised in 2006 ($49 billion). What is more important is that in 2009, during the market low, they raised $34 billion. Using the low cost capital raised, they were able to take advantage of fire sales by private REITs that were overleveraged.
- Going forward, with economy recovering and the increasing bussiness activities, commercial rentals will increase, enabling REITs to increase their earnings.
The following table compares the performance of two portfolios using a tactical asset allocation strategy: Four Core Asset ETF (EM) Benchmark Tactical Asset Allocation Moderate has four candidate funds (SPY, EFA, EEM, AGG), representing four core assets (US. Equity, International Equity, Emerging Market Equity, Fixed Income). Five Core Asset Index ETF Funds Tactical Asset Allocation Moderate adds US REITs (IYR) as a fifth asset candidate.
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Five Core Asset Index ETF Funds Tactical Asset Allocation Moderate 11% 97% 10% 85% 13% 85% Four Core Asset ETF (EM) Benchmark Tactical Asset Allocation Moderate 4% 47% 6% 53% 9% 53% The above clearly illustrates the advantage of REITs in portfolio building. It offers 4% extra annual return. This can be seen further by looking at the holdings of Five Core Asset Index ETF Funds Tactical Asset Allocation Moderate: it has held REITs (VNQ) since 12/2009, getting extra performance boost because of the out performance of REITs over other risk assets in the past one year.
Symbols: RWX,SPY,IYR,VIG,IDV,VYM,EEM,PID,EFA,FVD,DVY,PEY,SDY,PFF,
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.
- Dividend Stock ETFs All Dropped, But Showing Defensive
02/24/2011
Investors got a wake up call this week after the President's day: for the past two days, S&P has dropped 2.6%. We reviewed dividend stock ETFs performance in the following three equity classes:
- U.S. Equity: U.S. dividend stock ETFs appeared resilient among the market correction. For the past one week, for example, Vanguard High Dividend Yield Index (VYM) had the least loss: -0.68%, compared with SPY's 2.11% loss. In general, all U.S. dividend stock ETFs (SDY, FVD, DVY, VIG) outperformed the S&P 500 benchmark (SPY), showing that in general, dividend ETFs are more defensive during market stress.
- International Equity: similarly, Powershwares International Dividend Achievers (PID) lost only 0.69%, compared with MSCI's broadbase index EFA's 2.07% loss in the last 5 days.
- Emerging Market Equity: WisdomTree's Emerging Market Income (DEM) lost 1.57%, compared with broadbase index EEM's 2.18% loss.
Preferred stocks showed the least loss (-0.48%) among all the dividend ETFs we monitored. For more detailed performance, please refer to here.
The following table shows the trend scores for dividend ETFs. U.S. REITs (IYR), U.S. stocks (SPY) and U.S. dividend stocks (VYM, VIG) are retaining the top spots. Emerging market equity (EEM) and preferred stocks (PFF) are still at the bottom.
Assets Class Symbols 02/23
Trend
Score02/16
Trend
ScoreDirection iShares Dow Jones US Real Estate IYR 11.56% 14.05% v SPDR S&P 500 SPY 10.71% 13.17% v Vanguard High Dividend Yield Indx VYM 10.08% 10.94% v Vanguard Dividend Appreciation VIG 9.73% 10.79% v iShares Dow Jones Intl Select Div Idx IDV 9.51% 10.3% v SPDR DJ Wilshire Intl Real Estate RWX 9.42% 9.83% v PowerShares Intl Dividend Achievers PID 8.54% 8.66% v iShares MSCI EAFE Index EFA 8.21% 9.65% v First Trust Value Line Dividend Index FVD 7.75% 8.83% v iShares Dow Jones Select Dividend Index DVY 7.37% 8.72% v SPDR S&P Dividend SDY 7.22% 8.9% v WisdomTree Emerging Market Equity Income DEM 6.27% 7.05% v PowerShares HighYield Dividend Achievers PEY 6.16% 8.1% v iShares MSCI Emerging Markets Index EEM 3.79% 4.99% v iShares S&P U.S. Preferred Stock Index PFF 3.29% 4.06% v The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).
We would like to point out that more U.S. companies are expected increase their dividend payout in 2011. In a recent report by CNBC, Senior analyst Howard Silverblatt in S&P indices stated "We estimate that over half the S&P 500 issues will pay out more in regular cash payments in 2011 than they paid in 2010," Given the current anemic economic recovery, positioning the U.S. equity portion of one's portfolio in dividend stock ETFs is a good strategy with certain defensive nature.
In fact, in the last one year, investing in dividend ETFs has slightly outperformed a strategy that invests in broadbase indices. The following table shows the performance comparison between an income focused portfolio and a general market index focused portfolio, both using a tactical asset allocation strategy.Portfolio Performance Comparison
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Five Core Asset Index ETF Funds Tactical Asset Allocation Moderate 12% 100% 10% 85% 12% 87% Retirement Income ETFs Tactical Asset Allocation Moderate 13% 102% 9% 76% 10% 69%
Barring from a severe debt induced financial event in global markets, we view investors should pay more attention to dividend ETFs in the coming years for defensive and growth purposes.Symbols:RWX,SPY,IYR,VIG,IDV,VYM,EEM,PID,EFA,FVD,DVY,PEY,SDY,PFF,
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.
- International REITs Outshine Among Dividend ETFs
12/25/2010
- Yield Quest Turns from Bonds to High Yield Stocks
12/16/2010
- ETF's for Income Nov 29
11/29/2010
- ETF's for Income Rebound Well
11/23/2010
- High Dividend Stock ETFs for Income Producing Portfolios
11/12/2010
- Retirement Income Portfolio Building Using ETFs and Asset Allocation Strategies
11/12/2010
