 |
Vanguard ETF: |  |
7.4%* |
|
Diversified Core: | |
8.1%* |
|
Six Core Asset ETFs: | |
7.3%* |
Articles on SHM
- 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)
- Retirement Income Portfolio Building Using ETFs and Asset Allocation Strategies
11/12/2010
Building a steady and safe income producing portfolio is paramount to retirees. High yield stocks, preferred stocks, convertibles and bonds are the basic building blocks for such portfolios. Research results indicate that blue chip stocks with high dividends, unlike highly volatile and low dividend or no dividend stocks (such as many high tech stocks and small company stocks), have produced comparable or even slightly higher returns with less risk in long term.
In this article, we present a high income investment plan (Retirement Income ETFs) that is based on asset allocation strategies. Both MyPlanIQ Strategic Asset Allocation (SAA) and Tactical Asset Allocation (TAA) strategies are used to construct model portfolios.
This plan is designed for income producing purpose: high dividend (yield) stock ETFs are chosen for both US stocks and international stocks asset classes. We have decided to use general emerging market stocks ETFs (EEM or VWO) instead of some thinly traded high dividend emerging market stock ETFs. This situation will be changed once the high yield emerging market stock ETFs become more liquid and tradable.
The plan uses 34 ETFs that represent the following five key asset classes:
U.S. stocks: VIG, DVY, SDY, FVD, VYM, PEY, PFF
International stocks: PID, IDV
Emerging market stocks: EEM, VWO
Real Estate Investment Trusts (REITs): IYR, ICF, VNQ, RWX
Fixed Income:- US Fixed Income: HYG, LQD, VCLT, CIU, CORP, CSJ, VCSH, IEI, IEF, SHY, TLT, TIP, MBB, MUB, SHM
- International Fixed Income: BWX, EMB, PCY, WIP
Notice that preferred stocks PFF is classified under U.S. stocks.
We compared the back tested performances of the SAA and TAA moderate model portfolios with the corresponding SIB (Simpler Is Better) five core asset ETF portfolios. As of 11/9/2010, the performance is:Performance table (as of Nov 10, 2010)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Retirement Income ETFs Tactical Asset Allocation Moderate 16% 105% 8% 57% 12% 84% Retirement Income ETFs Strategic Asset Allocation Moderate 14% 108% 1% 5% 6% 28% Five Core Asset Index ETF Funds Tactical Asset Allocation Moderate 15% 105% 8% 57% 16% 106% Five Core Asset Index ETF Funds Strategic Asset Allocation Moderate 19% 146% 4% 16% 10% 42% From the above chart, one can see that since the portfolio inception (12/31/2000),the Retirement Income ETFs Strategic Asset Allocation Moderate has outperformed its corresponding Five Core Asset Index ETF Funds Strategic Asset Allocation Moderate while in the meantime, the Retirement Income ETFs Tactical Asset Allocation Moderate has outperformed its corresponding Five Core Asset Index ETF Funds Tactical Asset Allocation Moderate. In fact, in the past ten years, the Retirement Income portfolios had lower standard deviation than the Five Core SIB. Please visit the corresponding portfolios for more detailed performance information.
Currently, the SAA Moderate Portfolio has the following holdings and yields:Asset ETFs Allocation Yield REAL ESTATE ICF (iShares Cohen & Steers Realty Majors) 11.96% 2.88% FIXED INCOME LQD (iShares iBoxx $ Invest Grade Corp Bond) 18.40% 4.80% Emerging Market VWO (Vanguard Emerging Markets Stock ETF) 13.31% 1.20% US EQUITY DVY (iShares Dow Jones Select Dividend Index) 5.92% 3.53% US EQUITY PEY (PowerShares HighYield Dividend Achievers) 4.87% 4.28% INTERNATIONAL EQUITY IDV (iShares Dow Jones Intl Select Div Idx) 16.50% 4.25% High Yield Bond HYG (iShares iBoxx $ High Yield Corporate Bd) 16.47% 8.40% INTERNATIONAL BONDS BWX (SPDR Lehman Intl Treasury Bond) 12.57% 0.70% Total Yield 4% Compared with current sub-zero interests in a cash account, the above portfolio's yield is very attractive.
In conclusions, using effective asset allocation strategies (especially the tactical asset allocation strategy), one can build an income producing portfolio that is less risky and achieve higher returns. Retirees or anyone who needs supplemental income can benefit from learning more on these investment plans.labels:investment,
Symbols:VIG,DVY,SDY,FVD,VYM,PEY,PFF,SPY,IWM,PID,IDV,EFA,VEU,EEM,VWO,IYR,ICF,VNQ,RWX,HYG,LQD,VCLT,CIU,CORP,CSJ,VCSH,IEI,IEF,SHY,TLT,TIP,MBB,MUB,SHM,AGG,BND,BWX,EMB,PCY,WIP,
- 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
10/19/2010
Based on an article published by Bank Investment Consultant by Matt Ackermann, Vanguard, one of the largest index fund and ETF providers, will offer commission-free trading to its brokerage clients that use its lineups of 46 proprietary ETFs. This represents a comparable move as Fidelity and Schwab.
In addition to Fidelity and Schwab plans, MyPlanIQ now has a Vanguard major ETF plan. Notice since most Vanguard ETFs have short history, the performance data of the model portfolios are meaningful since 2003 (before that, most ETFs did not exist).
The following is the list of the ETFs supported in this plan (for up to date info, please see the Vanguard ETF page.
Consumer Discretionary VCR Consumer Staples VDC Dividend Appreciation VIG Emerging Markets VWO Energy VDE Europe Pacific VEA European VGK Extended Duration Treasury EDV Extended Market VXF Financials VFH FTSE All-World ex-US VEU FTSE All-World ex-US Small-Cap VSS Growth VUG Health Care VHT High Dividend Yield VYM Industrials VIS Information Technology VGT Intermediate-Term Bond BIV Intermediate-Term Corporate Bond VCIT Intermediate-Term Government Bond VGIT Large-Cap VV Long-Term Bond BLV Long-Term Corporate Bond VCLT Long-Term Government Bond VGLT Materials VAW Mega Cap 300 MGC Mega Cap 300 Growth MGK Mega Cap 300 Value MGV Mid-Cap VO Mid-Cap Growth VOT Mid-Cap Value VOE Mortgage-Backed Securities VMBS Pacific VPL REIT VNQ Short-Term Bond BSV Short-Term Corporate Bond VCSH Short-Term Government Bond VGSH Small-Cap VB Small-Cap Growth VBK Small-Cap Value VBR Telecommunication Services VOX Total Bond Market BND Total Stock Market VTI Total World Stock VT Utilities VPU Value VTV Vanguard ETFs's 401K plan consists of 43 funds. These funds enable participants to gain exposure to 5 major assets: Emerging Market Equity , Foreign Equity , Fixed Income , US Equity , REITs . The list of minor asset classes covered:
Communications: IXP , PTE , DGG , LTL
Consumer Discretionary: RXI , VCR
Consumer Staples: KXI , VDC , PSL , DPN , RHS
DIVERSIFIED EMERGING MKTS: EEM , GMM , PXH , DEM , SCHE
DIVERSIFIED PACIFIC/ASIA: EPP , VPL , GMF , PAF
Equity Energy: ITE,IXC , IPW , DBE , RYE , DKA
EUROPE STOCK: IEV , VGK , PEF , DEB
Financial: IYF , VFH , IPF , PFI , DRF , RYF
Foreign Large Blend: EFA , VEU , GWL , PFA
FOREIGN SMALL/MID GROWTH: IFSM , VSS , SCHC
Health: IYH,IXJ , VHT , XBI , PBE , DBR , RYH
Industrials: IYJ,EXI , VIS
Intermediate-Term Bond: AGG,CIU , BIV,BND
LARGE BLEND: IVV,IYY,IWV , VTI,VV , SPY , DLN , RSP , SCHX
LARGE GROWTH: IVW,IWZ,JKE , VUG , ELG , QQQQ , RPG , SCHG
LARGE VALUE: IVE,IWW,JKF , VTV , ELV , PWV , RPV , SCHV
LONG GOVERNMENT: TLT,TLH,IEF , EDV,VGLT , TLO , PLW
Long-Term Bond: CLY,LQD , BLV,VCLT
MID-CAP BLEND: IJH,IWR,JKG , VO , MDY,EMM , PJG , DON,EZM , MVV
Mid-Cap Growth: IJK,IWP , VOT , EMG , PWJ , RFG , UKW
MID-CAP VALUE: IJJ,IWS,JKI , VOE , EMV , PWP , RFV , UVU
Natural Resources: IYM,IGE , VAW , XLB,XME , PYZ , DBN , RTM , UYM
REAL ESTATE: IYR,ICF , VNQ
SHORT GOVERNMENT: SHY,SHV , VGSH , PLK , USY
Short-Term Bond: CSJ , BSV,VCSH
SMALL BLEND: IJR,IWM,JKJ , VB , DSC , PJM , DES , SAA,UWM , SCHA
Small Growth: IJT,IWO,JKK , VBK , DSG , PWT , RZG , UKK
SMALL VALUE: IJS,IWN,JKL , VBR , DSV , PWY , RZV , UVT
Technology: MTK , PTF , DBT , RYT , ROM
Utilities: GII , PUI , DBU , RYU , UPW
WORLD STOCK: IOO , VTAs of Oct 15, 2010, this plan investment choice is rated as averagebased on MyPlanIQ Plan Rating methodology that was designed to measure how effective a plan's available investment funds are . It has the following detailed ratings:
Diversification -- Rated as above average (74%)
Fund Quality -- Rated as below average (33%)
Portfolio Building -- Rated as average (37%)
Overall Rating: average (47%)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 )
Foreign Equity:( EFA or VEU )
Emerging Market Equity:( EEM or VWO )
US Equity:( SPY or VTI )
Performance chart (as of Oct 15, 2010)Performance table (as of Oct 15, 2010)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Vanguard ETFs Tactical Asset Allocation Moderate 10% 67% 6% 39% 13% 84% Vanguard ETFs Strategic Asset Allocation Moderate 13% 92% 3% 9% 8% 39% Five Core Asset Index ETF Funds Tactical Asset Allocation Moderate 10% 65% 7% 48% 15% 103% Five Core Asset Index ETF Funds Strategic Asset Allocation Moderate 14% 99% 3% 10% 9% 41% Currently, asset classes in REITs( IYR , VNQ , ICF ) , Fixed Income( AGG , BND ) and Emerging Market Equity( EEM , VWO ) are doing relatively well. These asset classes are available to Vanguard ETFs participants.
To summarize, Vanguard ETFs plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles. Currently, the tactical asset allocation strategy indicates overweighing on reits , emerging market equity and fixed income funds.
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 Provider Playoffs
10/19/2010
ETF’s continue to broaden their appeal both in terms of flexibility and low cost. With commission free ETF’s, more money stays in the investors pocket rather than disappearing in fees. In addition, while many of these ETF’s have a 30 day minimum hold, this is ideal for long term investing when making changes more often than that can be counter productive.
Four companies offer commission free ETF’s and we are going to compare the offerings in detail to determine which is likely to offer the best value to the investor.
In this article we are going to compare Schwab and TD Ameritrade.
Schwab (Ticker SCHW) is a relative late comer to the ETF party. They offer the fewest ETF’s and the ETF’s have the shortest history. They only provide their own ETF's commission free. However, Schwab has a huge network and powerful brand so we expect Schwab to be a significant player in the market.
Schwab ETFNEW Bond ETFsSchwab U.S. TIPS ETF™Schwab Short-Term U.S. Treasury ETF™Schwab Intermediate-Term U.S. Treasury ETF™Domestic Equity ETFsSchwab U.S. Broad Market ETF™Schwab U.S. Large-Cap ETF™Schwab U.S. Large-Cap Growth ETF™Schwab U.S. Large-Cap Value ETF™Schwab U.S. Small-Cap ETF™International Equity ETFsSchwab International Equity ETF™Schwab International Small-Cap Equity ETF™Schwab Emerging Markets Equity ETF™Notable properties about the Schwab offering- The expense ratios are low
- There are four asset classes with a good choice of funds
- We would have liked to have seen more choices with other providers
- We would have liked to have seen funds with a longer history
- We would expect real estate to be added before long
- We would expect more choices in the international and emerging market segments before long
As most of the funds are very new, it’s impossible to do real back testing with the funds. So we have selected a commission efficient portfolio that includes:Asset Class Ticker Name LARGE VALUE SCHV Schwab U.S. Large-Cap Value ETF LARGE BLEND SCHX Schwab U.S. Large-Cap ETF LARGE BLEND SCHB Schwab U.S. Broad Market ETF LARGE GROWTH SCHG Schwab U.S. Large-Cap Growth ETF LARGE GROWTH IWF iShares Russell 1000 Growth Index SMALL VALUE IJS iShares S&P SmallCap 600 Value Index SMALL BLEND SCHA Schwab U.S. Small-Cap ETF Small Growth IJT iShares S&P SmallCap 600 Growth Foreign Large Blend SCHF Schwab International Equity ETF FOREIGN SMALL/MID GROWTH SCHC Schwab International Small-Cap Eq ETF DIVERSIFIED EMERGING MKTS SCHE Schwab Emerging Markets Equity ETF Inflation-Protected Bond TIP iShares Barclays TIPS Bond Intermediate Government IEI iShares Barclays 3-7 Year Treasury Bond SHORT GOVERNMENT SHY iShares Barclays 1-3 Year Treasury Bond Inflation-Protected Bond SCHP Schwab U.S. TIPS ETF SHORT GOVERNMENT SCHO Schwab Short-Term U.S. Treasury ETF Intermediate Government SCHR Schwab Intermediate-Term U.S. Trsy ETF LARGE VALUE VTV Vanguard Value Index LARGE BLEND VTI Vanguard Total Stock Market ETF LARGE VALUE VTV Vanguard Value ETF DIVERSIFIED EMERGING MKTS VWO Vanguard Emerging Markets Stock ETF Foreign Small/Mid Value SCZ iShares MSCI EAFE Small Cap Index Foreign Large Blend EFA iShares MSCI EAFE Index
As of Oct 15, 2010, the Schwab ETF investment choice is rated asaverage based on MyPlanIQ Plan Rating methodology that was designed to measure how effective a plan's available investment funds are . It has the following detailed ratings:
Diversification -- Rated as below average (19%)
Fund Quality -- Rated as average (59%)
Portfolio Building -- Rated as average (41%)
Overall Rating: average (40%)
The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies ( SAA and TAA , both provided by MyPlanIQ).
For comparison purpose, we also include the moderate model portfolios of a typical five asset SIB (Simpler Is Better) plan . This SIB plan has the following candidate index funds and their ETFs equivalent:Fixed Income:( AGG or BND )
Foreign Equity:( EFA or VEU )
Emerging Market Equity:( EEM or VWO )
US Equity:( SPY or VTI )
Performance chart (as of Oct 15, 2010)
Performance table (as of Oct 15, 2010)Portfolio Name1Yr AR1Yr Sharpe3Yr AR3Yr Sharpe5Yr AR5Yr Sharpe2%17%6%44%14%88%1%10%5%38%12%88%10%71%1%2%9%40%10%76%1%4%8%37%
The Schwab Funds perform adequately against the SIB’s.TD Ameritrade (Ticker: AMTD) are also newcomers to the ETF space offering 100+ commission free ETFs. The main restriction is that customers have to hold these ETFs for more than 30 days to make such trades ecommission free.
This is an almost ideal platform for retirement investing with a 30 day redemption period. With a web based application to monitor all of the funds in the plan, it should be possible to put together a very solid portfolio and deliver excellent results.
These funds provide exposure to 6 major assets: Emerging Market Equity , Foreign Equity , Fixed Income , US Equity , Commodity , Real estate.
The list of minor asset classes covered:COMMODITIES BROAD BASKET: GSG , DBC
Conservative Allocation: AOK
DIVERSIFIED EMERGING MKTS: EEM , GMM , PXH , DEM , SCHE
Emerging Markets Bond: PCY
EQUITY: VTI,VT
EUROPE STOCK: IEV , VGK , PEF , DEB
Foreign Large Blend: EFA , VEU , GWL , PFA
Foreign Large Growth: EFG
Foreign Large Value: EFV , PID , DWM
FOREIGN SMALL/MID GROWTH: IFSM , VSS , SCHC
Foreign Small/Mid Value: SCZ
Global Real Estate: IFGL , RWX
High Yield Bond: HYG , JNK , PHB
Inflation-Protected Bond: TIP
Intermediate Government: IEI , VGIT , ITE
Intermediate-Term Bond: AGG,CIU , BIV,BND
JAPAN STOCK: EWJ , JPP , PJO , DXJ
LARGE BLEND: IVV,IYY,IWV , VTI,VV , SPY , DLN , RSP , SCHX
LARGE GROWTH: IVW,IWZ,JKE , VUG , ELG , QQQQ , RPG , SCHG
LARGE VALUE: IVE,IWW,JKF , VTV , ELV , PWV , RPV , SCHV
Latin America Stock: ILF , GML
LONG GOVERNMENT: TLT,TLH,IEF , EDV,VGLT , TLO , PLW
Long-Term Bond: CLY,LQD , BLV,VCLT
MID-CAP BLEND: IJH,IWR,JKG , VO , MDY,EMM , PJG , DON,EZM , MVV
Mid-Cap Growth: IJK,IWP , VOT , EMG , PWJ , RFG , UKW
MID-CAP VALUE: IJJ,IWS,JKI , VOE , EMV , PWP , RFV , UVU
Moderate Allocation: AOM
Multisector Bond: AGG,GBF , BND , LAG
Muni National Interm: ITM
Muni National Long: MUB , TFI , PZA , MLN
Muni National Short: SUB , SHM , PVI , SMB
PACIFIC/ASIA EX-JAPAN STK: EPP,AAXJ , GMF , PAF , DND
REAL ESTATE: IYR,ICF , VNQ
SHORT GOVERNMENT: SHY,SHV , VGSH , PLK , USY
Short-Term Bond: CSJ , BSV,VCSH
SMALL BLEND: IJR,IWM,JKJ , VB , DSC , PJM , DES , SAA,UWM , SCHA
Small Growth: IJT,IWO,JKK , VBK , DSG , PWT , RZG , UKK
SMALL VALUE: IJS,IWN,JKL , VBR , DSV , PWY , RZV , UVT
SPECIALTY-REAL ESTATE: RWR , PSR , URE
World Allocation: AOR , AOA
WORLD BOND: IGOV , BWX,WIP
WORLD STOCK: IOO , VT
As of Oct 15, 2010, this plan investment choice is rated as above average based on MyPlanIQ Plan Rating methodology that was designed to measure how effective a plan's available investment funds are . It has the following detailed ratings:
Diversification -- Rated as great (97%)
Fund Quality -- Rated as below average (28%)
Portfolio Building -- Rated as great (90%)
Overall Rating: above average (73%)
The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies ( SAA and TAA , both provided by MyPlanIQ).
For comparison purpose, we also include the moderate model portfolios of a typical five asset SIB (Simpler Is Better) plan . This SIB plan has the following candidate index funds and their ETFs equivalent:
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 Name1Yr AR1Yr Sharpe3Yr AR3Yr Sharpe5Yr AR5Yr Sharpe13%87%13%86%20%128%10%83%-1%-6%9%46%10%65%9%66%17%114%11%84%2%9%9%42%
Currently, asset classes in REITs( IYR , VNQ , ICF ) , Fixed Income( AGG , BND ) and Emerging Market Equity( EEM , VWO ) are doing relatively well. These asset classes are available to TD Ameritrade Commission Free ETFs participants.
Portfolio Performance ComparisonPortfolio Name1Yr AR1Yr Sharpe3Yr AR3Yr Sharpe5Yr AR5Yr Sharpe13%87%13%86%20%128%1%10%5%38%12%88%10%83%-1%-6%9%46%10%71%1%2%9%40%In this round, TD Ameritrade is the clear winner with tactical asset allocation while the Schwab SAA pretty much matches its counterpart.
TD Ameritrade's two key advantages are:- A large number of ETF’s in six asset classes to allow the construction of high performance portfolios
- Providing ETF’s with history from industry leading suppliers
TD Ameritrade is the clear winner and moves on to the final round.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,
- TD Ameritrade Commission Free ETFs Report On 12/07/2010
12/07/2010
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