Furthermore, when a portfolio is constructed with dividend funds instead of general stock funds, the portfolio usually has better risk adjusted returns (Sharpe ratio). This is obvious for a Strategic Asset Allocation  based portfolio, but it is also true for Tactical Asset Allocation. The intuition behind this is that dividend funds exhibit more stable trend than broad base index funds, mostly due to their steadier returns. 

The following shows how the model portfolios of   Retirement Income ETFs  (a plan consisting of mainly dividend paying stock funds and various bond funds) have compared with their counter parts in the other two plans: 

Portfolio Performance Comparison (as of 2/15/2013)

Ticker/Portfolio Name	1 Week Return*	YTD Return**	1Yr AR	1Yr Sharpe	3Yr AR	3Yr Sharpe	5Yr AR	5Yr Sharpe	10Yr AR	10Yr Sharpe
MyPlanIQ Diversified Core Allocation ETF Plan Strategic Asset Allocation – Optimal Moderate	0.0%	2.4%	8.3%	108.1%	10.9%	96.5%	6.4%	40.0%	9.8%	69.0%
MyPlanIQ Diversified Core Allocation ETF Plan Tactical Asset Allocation Moderate	0.0%	1.7%	10.3%	158.5%	9.2%	91.0%	7.9%	73.2%	10.7%	94.1%
Retirement Income ETFs Strategic Asset Allocation – Optimal Moderate	0.1%	2.2%	9.9%	148.8%	11.4%	114.0%	6.5%	40.8%	8.1%	57.6%
Retirement Income ETFs Tactical Asset Allocation Moderate	0.3%	1.9%	8.3%	134.7%	11.9%	122.4%	7.8%	72.2%	11.7%	99.9%
Six Core Asset ETFs Strategic Asset Allocation – Optimal Moderate	-0.0%	2.2%	7.8%	99.2%	9.6%	82.8%	4.6%	26.3%	7.5%	48.2%
Six Core Asset ETFs Tactical Asset Allocation Moderate	-0.0%	0.9%	6.8%	118.9%	7.3%	72.3%	7.3%	67.3%	10.4%	86.8%

*: NOT annualized