 |
Vanguard ETF: |  |
7.4%* |
|
Diversified Core: | |
8.1%* |
|
Six Core Asset ETFs: | |
7.3%* |
Articles on RWR
- Japan’s Disasters Slams the Market – What Happens to REIT Now?
03/22/2011
The recent slide in global stocks due to the triple disasters in Japan erased 2011 S&P gains. The MSCI world index has decline more than 6.77% this month all the tickers are flashing red. The Fed pledges it will continue the second round of quantitative easing by buying back more treasuries and keeping the interest rates low. The recovery is on its way but still time is needed especially in light of recent events. In addition, escalating tension in the Middle East along with the recent downgrading of Spain and Portugal by Standard & Poor’s adding downward pressure to the market. Risk is very visible at the moment.
This is an excellent time to discuss US REAL ESTATE INVESTMENT TRUST ETF’s (US REITS). With equities domestically and internationally under pressure, having an asset class that is uncorrelated with equities, can help lower risk and provide a hedge. US REITS have a total return around 17-20%. over the last 52 weeks. Please see the table of US REITS.
Description
Symbol
1 Yr
3 Yr
5 Yr
Avg. Volume(K)
1 Yr Sharpe
Vanguard REIT Index ETF
17.38%
1.23%
0.37%
1,735
97.45%
SPDR Dow Jones REIT
17.83%
0.3%
-1.17%
260
99.15%
iShares Dow Jones US Real Estate
17.51%
0.6%
-1.7%
7,165
103.34%
iShares Cohen & Steers Realty
20.25%
-1.24%
-1.8%
610
112.48%
The two top performers are:
Ø iShares Cohen & Steers Realty (ICF) with a return of around 20.25%
Ø SPDR Dow Jones REIT (RWR) with return of around 17.83%
Although the 52 weeks returns are strong, the shorter term returns shows a slowing in the momentum of REITS. Reviewing returns over time show that the US REITS are competing the Internationals REITS making it more better place for investment internationally and the show the strong fundamentals of US REITS.
LONG TERM US REITS POSITIONING:
REIT’s have enjoyed two good years of 28% returns. The key question is, “Will the rally will continue in the US REIT’s?” As long as the FED keeps interest rate low US REITS will continue to enjoy good but lower returns.. The long term of US REIT is positive and we can see further rise in the upcoming days.
Investors looking for high dividend yields also favored the REIT sector. Solid dividend payouts are arguably the biggest enticement for REIT investors as U.S. law requires REITs to distribute 90% of their annual taxable income in the form of dividends to shareholders.
Conclusion
Over the past week, the world index has dropped 6.7%. At the same time, US REITs have dropped around 2.3%. With a disaster on such an unprecedented scale as Japan, almost everything is going to be hit but having an asset class uncorrelated with equities gives us an alternative path to provide a hedge.
The crisis, as disastrous as it is at a human and ecological level, will have reducing impact on financial markets over time and we will likely see REITS return back into positive territory.
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:VNQ,RWR,IYR,ICF,RWO,RWX,IFGL,DRW,WPS,
Exchange Symbols: (NYSE: vnq), (NYSE: rwr), (NYSE: iyr), (NYSE: icf), (NYSE: rwo), (NYSE: rwx), (NYSE: IFGL), (NYSE: drw), (NYSE: wps) - RWO, RWR Replace VNQ in the Six Asset Portfolio
03/20/2011
We are working through a series of articles to help improve returns for retirement investors. Aging boomers highlight the major retirement crisis as they come to the end of their working careers. They don’t have enough money. There is no money to bail out retirement – it’s already been spent on salvaging the economy for the working. It is going to be up to the individual to make the most of what they have. They will have to accept less or work longer or achieve better returns from their investments
We believe that it is possible for the individual to be more involved with their retirement investing and to see better results. These articles are intended to help build the foundational understanding that will enable better returns, lower risk and less angst in our lives.
What we have seen is:- Increasing diversification from three areas to six can make a significant impact on simulated historical returns
- Only a few retirement plans (~4%) have six asset classes but it may be possible to create a holistic portfolio with the combination of IRA and 401K plans
- We have added a managed bond fund in this critical area at a time when fixed income is under pressure and that part of the portfolio would benefit from active management. Note that we have picked what is probably one of the gold standards of recent years and not all managers are created equal
- The current set of funds we have developed are VTI, VEU, BND, VNQ, VWO, DBC, PTTDX
- We replaced VTI with LargeCap Blend RSP, MidCap Value IJJ SmallCap Growth VBK
- (NYSEArca: VTI ), (NYSEArca: VEU), (NYSEArca: BND), (NYSEArca: VNQ), (NYSEArca: VWO), (NYSEArca: DBC), (MUTF:PTTRX), (MUTF: PTTDX), (NYSEArca: RSP), (NYSEArca: IJJ), (NYSEArca: VBK),
In the last article we saw that adding three US ETFs in place of VTI didn't move the needle much. That doesn't mean that it is not valuable to have the funds, just that the market dynamics didn't show the benefit.It is likely that the benefits will be seen in future as SmallCap Growth are currently leading the US equities league table
In this article, we are going to focus on Real Estate Trusts. Anything with Real Estate in its name causes a visceral reaction as Real Estate was the notional straw that broke Wall Street's back and while the recovery is happening, we are not out of the woods. However, Real Estate Trusts are not consumer biased and they have been strong contributors to portfolios over the past year.
To keep the portfolio as small as possible, I am going to have two funds -- one domestic and one international.U.S. REITs
Description Symbol 1 Yr 3 Yr 5 Yr Avg.
Volume(K)1 Yr Sharpe Vanguard REIT Index ETF VNQ 30.39% 3.38% 1.97% 1,694 174.86% SPDR Dow Jones REIT RWR 31.88% 2.47% 0.57% 243 184.72% iShares Cohen & Steers Realty ICF 33.82% 0.56% -0.1% 616 191.7% iShares Dow Jones US Real Estate IYR 29.32% 1.97% -0.14% 7,342 176.35%
The US REITs are ordered by they five year returns. While VNQ has the best five year return, it is at the bottom of the list over the past one year. ICF is attractive in the short term but has poor medium term performance. Therefore, I selected RWR as it has better short term properties and will likely be better going forward. Again, I am not an expert in researching likely forward looking returns, others may be.International REITs
Description Symbol 1 Yr 3 Yr 5 Yr Avg.
Volume(K)1 Yr Sharpe SPDR Dow Jones Global Real Estate RWO 27.78% NA NA 71 144.86% SPDR Dow Jones Intl Real Estate RWX 24.45% -3.57% NA 312 106.56% WisdomTree International Real Estate DRW 22.25% -3.97% NA 32 99.26% iShares S&P Dev ex-US Property WPS 16.81% -4.01% NA 20 79.7% iShares FTSE EPRA/NAREIT Dev Real Estate IFGL 13.32% -5.29% NA 66 65.6%
When we examine the international REITs, we see that they have a shorter history so they were sorted on the three year returns and RWO came out the clear winner.
My two picks areIt is possible to make different selection and measure historical returns but these are the choices I make for this exercise and we will now review the historical returns against the previous version with just VNQ. Note that I have removed VNQ from the list of fund choices.
Attribute Six Core Asset ETF Benchmark With PTTRX-3USETfs-2REIT Six Core Asset ETF Benchmark With PTTRX-3USETFs Diversification above average (68%) above average (65%) Fund Quality average (37%) average (54%) Portfolio Building above average (80%) above average (83%) Overall Rating average (64%) above average (69%)
Performance chart (as of Mar 10, 2011)Performance table (as of Mar 10, 2011)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Six Core Asset ETF Benchmark With PTTRX-3USETfs-2REIT Tactical Asset Allocation Moderate 11% 82% 10% 79% 14% 96% Six Core Asset ETF Benchmark With PTTRX-3USETfs-2REIT Strategic Asset Allocation Moderate 16% 128% 6% 28% 8% 38% Six Core Asset ETF Benchmark With PTTRX-3USETFs Tactical Asset Allocation Moderate 13% 96% 11% 84% 14% 98% Six Core Asset ETF Benchmark With PTTRX-3USETFs Strategic Asset Allocation Moderate 16% 124% 7% 31% 8% 40%
We have already noted that the graph is going to be misleading because of the youth of the ETFs. VTI and VNQ were available before RWO, RWR, RSP, IWS and IJT so, in the early days, we were comparing portfolios with different numbers of asset classes. We have also noted that VNQ beat RWR in the longer time horizon and RWO was not available in the five year horizon but only in the three year horizon.
Notes- In the longer term there is no appreciable difference at least rounded up to the nearest whole percent
- In the three year time frame the plan with the extra funds beats the other by 1% over both strategic and tactical asset allocation
- In the short term, the simpler plan actually outperformed the plan with more funds which seems counter intuitive
We have already covered the limitations of momentum strategies and how that pertains to rotating sub-classes. The asset class rotation was not effective in the one year timeframe for Tactical asset allocation and the as both SAA and TAA will deploy both the REITs and their aggregate performance almost equal to VNQ so the SAA strategies are identical.
It is important to weigh the merits of historical performance which is past with the hope for future performance. The choices made here were with an eye to the future. International REIT will hopefully provide better diversification to minimize volatility and capture gains and the choice of the newer funds with better short term performance should hopefully give better returns. However, there is not a huge difference and it could be, for the sake of simplicity, one would want to keep this at one fund..
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:VTI,VEU,BND,VNQ,VWO,DBC,PTTDX,RSP,IJJ,VBK,EFA,RWO,RWR,(NYSEArca,VTI,),(NYSEArca,VEU),(NYSEArca,BND),(NYSEArca,VNQ),(NYSEArca,VWO),(NYSEArca, ,DBC),(MUTF,PTTRX),(MUTF,PTTDX),(NYSE,RSP),(NYSE,VBK),(NYSE,IJJ),(NYSE,EFA),(NYSE,RWR),(NYSE,RWO) ,
- Swensen Six Asset Lazy Portfolio Review Exhibits Different Q1 Behavior
03/19/2011
In the last article, we looked over the prior year's returns for the Swensen Six Lazy Portfolio. David Swensen, the Yale Endowment Investment Manager, proposed this portfolio for individual investors.
- 30% in Vanguard Total Stock Market Index (MUTF: VTSMX) ), (NYSE: VTI)
- 20% in Vanguard REIT Index (MUTF: VGSIX), (NYSE: VNQ)
- 20% in Vanguard Total International Stock (MUTF: VGTSX) or 15% in (VGTSX) and 5% in (MUTF: VEIEX), (NYSE: VEU), (NYSE: VWO), (NYSE: VEA)
- 15% in Vanguard Inflation Protected Securities (MUTF: VIPSX), (NYSE: TIP)
- 15% in Vanguard Long Term Treasury Index (MUTF: VUSTX), (NYSE: LQD)
We made one year comparisons between
- The original Swensen funds with an annual rebalance. Swensen himself performs a daily rebalance but that is too onerous for the general user
- The original Swensen funds with a quarterly rebalance. Normal protocal for advisors is to have a quarterly review of a portfolio and that is what this is
- The Swensen funds with the MyPlanIQ strategic asset allocation for a moderate portfolio, 40% bonds 20% in each of the other three asset classes
- The Swensen funds with the MyPlanIQ tactical asset allocation for a moderate portfolio, 40% bonds 30% in each of the top two asset classes or moved to fixed income (including cash)
- The Six Core Asset ETF Benchmark
Portfolio Performance Comparison
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe David Swensen Six Asset Individual Investor Plan Strategic Asset Allocation Moderate 9% 109% 4% 21% 6% 31% David Swensen Six Asset Individual Investor Plan Tactical Asset Allocation Moderate 9% 100% 8% 75% 11% 83% P David Swensen Yale Individual Investor Portfolio Annual Rebalancing 14% 110% 5% 22% 5% 22% P David Swensen Yale Individual Investor Portfolio Quarterly Rebalancing 15% 115% 5% 21% 5% 20% Six Core Asset ETF Benchmark Tactical Asset Allocation Moderate 12% 86% 8% 65% 13% 88%
We now drill down into the first quarter of 2011 to see where differing market conditions test the portfolio's performance. As we come to the end of the QEII program, we expect to see pressure on fixed income. PIMCO recently moved more heavily into cash and fixed income has been under pressure in general for a couple of quarters. In addition, with inflation becoming a reality in the emerging world, the lack of commodities could result in a drop in returns.We previously noted that the buy and hold portfolios outperformed the momentum portfoilos over the past year. However, as we look into the end of that year (March 2010 - March 2011), we see a different picture emerging. There are a lot of moving parts as the fixed income segment is under a lot of pressure which is only exacerbated by the end of QEII. Inflation is making commodities more desirable followed by real estate and US Equities.
By looking at the current Major Asset Class Trends (note that we include Gold even though it isn't a major asset trend in its own right) we can see that Commodities are clearly leading the field. Real Estate and US Equities are running neck and neck and fixed income is at the bottom of the table.
Major Asset Classes Trend
03/11/2011
Description Symbol 1 Week 4 Weeks 13 Weeks 26 Weeks 52 Weeks Trend Score Commodities DBC -3.09% 2.93% 12.39% 27.11% 25.38% 12.94% Gold GLD -0.81% 4.46% 2.08% 13.55% 28.04% 9.46% US Stocks VTI -1.42% -1.83% 6.16% 20.86% 16.39% 8.03% US Equity REITs VNQ 0.03% -1.17% 7.18% 11.52% 22.59% 8.03% International REITs RWX -2.38% 0.62% 3.97% 12.27% 19.95% 6.89% Emerging Market Stks VWO -2.15% 0.96% -0.17% 10.17% 14.38% 4.64% US High Yield Bonds JNK -0.52% 0.13% 4.14% 7.46% 9.42% 4.13% International Treasury Bonds BWX -0.23% 2.98% 4.84% 6.29% 6.33% 4.04% International Developed Stks EFA -3.09% -2.45% 2.97% 12.37% 6.61% 3.28% US Credit Bonds CFT 0.57% 1.48% 1.49% -0.3% 5.3% 1.71% Emerging Mkt Bonds PCY 0.65% 1.93% -1.05% -1.84% 6.23% 1.18% Intermediate Treasuries IEF 0.71% 2.07% 0.2% -2.75% 5.59% 1.16% Frontier Market Stks FRN -0.59% -0.99% -9.1% -0.5% 16.21% 1.01% Total US Bonds BND 0.55% 1.57% 0.56% -0.72% 2.92% 0.97% Mortgage Back Bonds MBB 0.47% 1.64% 0.46% -2.36% 0.41% 0.12% Treasury Bills SHV 0.04% 0.03% 0.04% 0.06% 0.09% 0.05% Municipal Bonds MUB -0.08% -0.58% 1.34% -5.02% -1.76% -1.22% Comparing the different plans, they each have slightly different properties
- The two original Swensen plans will only rebalance, there is no notion of rotating funds -- with the simplicity of the plan, this only makes sense with the fixed income portion
- The Swensen plan with TAA and SAA do have the ability to rotate fixed income funds into cash or each other with a 90 day redemption period restriction
- The Benchmark has commodities and the ability to rotate funds into cash with a 30 day redemption period
Currently
- The Six Asset Benchmark has moved all the fixed income to cash and has the risk assets in real estate and commodities.
- The Swensen TAA is in cash Real Estate and US Equities
- The Swensen SAA has 15% in cash and 15% in inflation protected (TIP, VIPSX), the balance distributed over US, international and Real Estate
The takeaways from the last quarter's review are:- Equities have still been doing well so that the buy and hold of the original Swensen portfolio with only 30% in fixed income is doing well
- The benchmark still trumps the original portfolio based on exposure to Commodities and the ability to move out of fixed income into cash
- The Swensen TAA and SAA portfolios are weighed down by extra fixed income exposure and not access to commodities as well as not being able to quickly move in and out of sub-classes with a 90 day holding period
Our contention is, for those who are serious about optimizing their long term investments, that you have to be involved. A lazy portfolio is appealing because you can "fire and forget" with only quarterly adjustments. However, if you want more out of your investments and you accept that conditions will change, then a portfolio with monthly adjustments is more likely to give you better returns. It's our contention that a monthly review (not necessarily requiring action every month), is about the right frequency.Symbols:VTI,VEU,BND,VNQ,VWO,DBC,VEA,TIP,LQD,BND,EFA,PTTRX,PTTDX,RSP,VBK,IJJ,RWR,RWO,(NYSEArca,VTI,),(NYSEArca,VEU),(NYSEArca,BND),(NYSEArca,VNQ),(NYSEArca,VWO),(NYSEArca, ,DBC),(MUTF,PTTRX),(MUTF,PTTDX),(NYSE,RSP),(NYSE,VBK),(NYSE,IJJ),(NYSE,EFA),(NYSE,RWR),(NYSE,RWO) ,
- What Do Japan and Libya Tell Us About Retirement Investing?
03/17/2011
The events of recent days reveal the connected nature of the world in which we live. Twenty years ago, Japan was part of the mysterious far east and now we share their disaster minute by minute and are moved by their courage and the tragedy.
We also observe how startling events of nature, along with man-made events in North Africa and the Middle East have put a significant damper on the financial markets and a dagger of fear can pierce our hopes for a sustained rally and the recovery of our hopes for a secure retirement. Just as the Japanese preparedness has been tested to breaking point, incidents and unexpected changes in direction test the preparedness of our financial planning and investing strategy. It is one thing to have a backup in case it rains but who really would have thought that a triple disaster would strike
In that light, we are looking to build an investment portfolio that will provide downside protection and upside growth to deal with the slings and arrows of outrageous fortune. We have seen that diversifying from three to six asset classes doubled your investments in a decade based on historical simulations of a simple six asset class benchmark. Subsequent to that, we have been adding more funds to each of the asset classes to determine if, and by how much, adding additional funds will provide additional returns.
We have already reviewed what adding more funds to fixed income, US Equties and REIT has made. In this article we add commodities and then review all the work we have done to date and draw some conclusions before we add the last two classes.
In the original benchmark, we had (NYSE: DBC) as the commodity ETF. The main reason for this is that it is one of the oldest commodity ETF's that will provide the best history. If we review the alternatives with an eye to the future as well as the past, we should look at how they have performed recently.Description Symbol 1 Yr 3 Yr 5 Yr Avg. Volume(K) 1 Yr Sharpe GreenHaven Continuous Commodity GCC 36.84% -0.63% NA 193 247.99% ELEMENTS Rogers Intl Commodity RJI 28.08% -8.14% NA 596 137.27% iPath DJ-UBS Commodity Index Tracker DJP 23.05% -9.31% NA 461 135.02% PowerShares DB Commodity Index DBC 24.64% -8.02% 6.6% 2,249 127.44% iShares S&P GSCI Commodity-Index GSG 16.76% -15.92% NA 639 77.14%
We note that DBC is the only choice with five years of history. We also note that GreenHaven has the best 1 and 3 year returns and so would be a natural pick. I am have decided to stay with DBC so that we have the historical perspective when we run simulation.
When we look at this, we would expect that the addition of GCC will be of benefit to the strategic asset allocation as it provides a better choice in the three and one year timeframe. The benefit to the tactical asset allocation will be more in the one year timeframe as the strategy would likely have preferred fixed income or cash in the three year timeframe.SAA(Moderate) Performance Comparison of Plans
Plan Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Six Core Asset ETF Benchmark(Moderate) 10% 113% 4% 17% 6% 32% Six Core Asset ETF Benchmark With PTTRX(Moderate) 11% 111% 5% 23% 7% 37% Six Core Asset ETF Benchmark With PTTRX-3USETFs(Moderate) 10% 109% 6% 26% 7% 38% Six Core Asset ETF Benchmark With PTTRX-3USETfs-2REIT(Moderate) 10% 113% 5% 23% 7% 35% Six Core Asset ETF Benchmark With PTTRX-3US-2REIT-2COMM(Moderate) 11% 86% 5% 21% 7% 30% We can see that the results are not monotonic. You can see that there is a "drift" towards higher historical returns with more funds but you can't bank on it. Remember that the strategy rotates funds in based on their price performance and this is not always correct. It often is, but not always. The more funds you have, the more decisions the strategy is making. When you have a large number of funds, the strategy will be right more often than not, but when you only have a few, the times when it isn't right are more noticeable.
The key point is that having the ability to rotate funds can help when circumstances favor a particular sub-class, you just can't guarantee that you will make the right choice all the time. However, you will have more choices when you want to be defensive and find a safer harbor for your funds.
TAA(Moderate) Performance Comparison of Plans
Plan Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Six Core Asset ETF Benchmark(Moderate) 8% 86% 9% 65% 12% 88% Six Core Asset ETF Benchmark With PTTRX(Moderate) 8% 90% 10% 78% 13% 97% Six Core Asset ETF Benchmark With PTTRX-3USETFs(Moderate) 7% 84% 10% 75% 13% 96% Six Core Asset ETF Benchmark With PTTRX-3USETfs-2REIT(Moderate) 7% 80% 10% 74% 13% 96% Six Core Asset ETF Benchmark With PTTRX-3US-2REIT-2COMM(Moderate) 8% 58% 9% 69% 12% 86%
The behavior here is slightly different. We have previously noted that 2010 was a poor year for tactical asset allocation strategies as no strong trend was established and with more funds, there was more opportunity to swap in and out of funds looking for a trend that never materialized. It is easy to see that with hindsight but, at the time, nobody knew. At this point, it appears that Commodities are on a strong run and that maybe set for some time. On the other hand, there has been a crossing between REIT and US equities for the second asset class to be selected.
Given that we have looked at the commodities ETFs and we know that GCC has had better 1 year performance and we know that Commodities are currently being deployed, we also know that the final portfolio is unique in having access to that ETF and so there will be an incremental boost to the short term returns.
Takeawayws
- There is no magic or free lunch in retirement investing
- You want to be as diversified in as many asset classes as you can
- You want to have alternative funds in each asset class in case one of them is performing poorly
- Additional funds in the asset class does not always result in higher returns
- Whichever way you look at it, there are upsides and downsides
- With SAA, you get the maximum benefit in good times but you can see significant downsides in bear markets
- With TAA you are protected from big downside risk but you will likely miss the start of the upturn and/or and surprises with asset classes performing unexpectedly well
- Over the longer term, when there are benefits for more funds in each asset class
- If you want to limit downside, TAA has clear benefits
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:VTI,VEU,BND,VNQ,VWO,DBC,PTTDX,RSP,IJJ,VBK,EFA,RWO,RWR,GCC,(NYSEArca,VTI,),(NYSEArca,VEU),(NYSEArca,BND),(NYSEArca,VNQ),(NYSEArca,VWO),(NYSEArca, ,DBC),(MUTF,PTTRX),(MUTF,PTTDX),(NYSE,RSP),(NYSE,VBK),(NYSE,IJJ),(NYSE,EFA),(NYSE,RWR),(NYSE,RWO),(NYSE,GCC) ,
- There is no magic or free lunch in retirement investing
- 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 , VTAs 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,
- Top Tier ETF Providers Playoffs II
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- TD Ameritrade Commission Free ETFs Report On 12/07/2010
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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)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe TD Ameritrade Commission Free ETFs Tactical Asset Allocation Moderate 9% 68% 12% 78% 18% 115% TD Ameritrade Commission Free ETFs Strategic Asset Allocation Moderate 8% 71% -1% -8% 7% 36% Six Core Asset ETFs Tactical Asset Allocation Moderate 10% 67% 9% 69% 16% 105% Six Core Asset ETFs Strategic Asset Allocation Moderate 11% 87% 3% 12% 8% 37% 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