Re-balance Cycle Reminder All MyPlanIQ’s newsletters are archived here.
For regular SAA and TAA portfolios, the next re-balance will be on Monday, November 9, 2015. You can also find the re-balance calendar for 2015 on ‘Dashboard‘ page once you log in.
As a reminder to expert users: advanced portfolios are still re-balanced based on their original re-balance schedules and they are not the same as those used in Strategic and Tactical Asset Allocation (SAA and TAA) portfolios of a plan.
Please note that we now list the next re-balance date on every portfolio page.
Broad Base Index Core ETFs Review
As due diligence, we regularly review ETFs used in our major brokerage plans. In this newsletter, we look at and compare broad base index ETFs that represent core asset classes. These ETFs are used in brokerage ETF plans including
- Fidelity Commission Free ETFs
- Schwab Commission Free ETFs
- TD Ameritrade Commission Free ETFs
- Vanguard Liquid ETFs and other plans that can be used for many brokerages including Six Core Asset ETFs, MyPlanIQ Diversified Core Allocation ETF Plan and Retirement Income ETFs.
US Equity
The following table compares broad base US stock index ETFs:
US Equity Index ETF Performance Comparison (as of 11/02/2015):
| Ticker/Portfolio Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR | 10Yr Sharpe |
|---|---|---|---|---|---|---|
| IVV (iShares Core S&P 500) (Fidelity) | 3.9% | 6.5% | 16.7% | 14.5% | 8.2% | 0.35 |
| SCHB (Schwab US Broad Market ETF) (Schwab) | 2.0% | 5.7% | 16.1% | 14.1% | ||
| VTI (Vanguard Total Stock Market ETF) (Vanguard, TD Ameritrade, Six Core, …) | 1.9% | 5.7% | 16.1% | 14.1% | 8.2% | 0.36 |
| SPY (SPDR S&P 500 ETF) (Etrade) | 2.7% | 6.4% | 16.1% | 14.2% | 7.9% | 0.34 |
| VOO (Vanguard S&P 500 ETF) (Vanguard) | 2.7% | 5.8% | 15.9% | 14.1% |
In general, these funds have very similar performance. One surprise is that iShares Core S&P 500 has done better than other S&P 500 ETFs by some big margin. Schwab’s broad base US stock ETF has the exact same performance as Vanguard VTI.
Let’s also look at dividend and low volatility funds:
Dividend and Low Volatility ETF Performance Comparison (as of 11/02/2015):
Portfolio Performance Comparison
| Ticker/Portfolio Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 5Yr Sharpe | 10Yr AR |
|---|---|---|---|---|---|---|
| SPLV (PowerShares S&P 500 Low Volatility ETF) (MyPlanIQ, Retirement ETFs) | 3.1% | 8.2% | 14.0% | |||
| USMV (iShares MSCI USA Minimum Volatility) (Retirement ETFs, Fidelity) | 5.1% | 9.6% | 15.1% | |||
| VYM (Vanguard High Dividend Yield ETF) (Retirement ETFs, Etrade, TD) | 1.1% | 4.1% | 14.3% | 14.5% | 1.07 | |
| VIG (Vanguard Dividend Appreciation ETF) (Retirement ETFs, TD) | -1.3% | 2.5% | 12.5% | 11.7% | 0.83 | |
| DVY (iShares Select Dividend) (Etrade, Retirement ETFs) | -0.7% | 2.4% | 13.8% | 13.7% | 1.03 | 6.2% |
| SDY (SPDR S&P Dividend ETF) (Retirement ETFs) | 0.5% | 5.0% | 14.8% | 12.8% | 0.92 | |
| SCHD (Schwab US Dividend Equity ETF) (Schwab) | 0.4% | 3.7% | 14.4% |
The two low volatility ETFs have similar performance though iShares index has done better. Schwab dividend ETF delivers a respectable performance. Vanguard dividend appreciation ETF has done worse than Vanguard high dividend ETFs — we believe this is due to VYM’s overweight on financial services (14.5% vs. VIG’s 5.7%), VYM’s underweight on industrials (12% vs. VIG’s 22%). The performance difference is mainly caused by the market cycle stages (services have done better than industrials as technically US manufacturing is near recession while consumer spending has been robust).
In this category, the take away is that the new comer Schwab’s ETFs have proven themselves.
International Developed Market Stock ETFs
International Developed Market Stock ETF Performance Comparison (as of 11/02/2015):
| Ticker/Portfolio Name | YTD Return** |
1Yr AR | 3Yr AR | 3Yr Sharpe | 5Yr AR | 10Yr AR |
|---|---|---|---|---|---|---|
| IEFA (iShares Core MSCI EAFE) (Fidelity) | 3.2% | 1.1% | 8.1% | 0.58 | ||
| SCHF (Schwab International Equity ETF) (Schwab) | 0.9% | -1.2% | 6.5% | 0.47 | 4.1% | |
| VEA (Vanguard FTSE Developed Markets ETF) (Vanguard, TD, Six Core, MyPlanIQ, Retirement ETFs) | 2.6% | 0.3% | 7.9% | 0.55 | 4.7% | |
| EFA (iShares MSCI EAFE) (Etrade) | 2.1% | -0.1% | 7.6% | 0.53 | 4.6% | 3.9% |
Two observations:
- Schwab’s ETF is a disappointment. This is unfortunate as this ETF is a key candidate fund in a Schwab portfolio.
- EFA, with its much higher expense (0.33% vs. VEA’s 0.09%), is not a good choice. We strongly recommend using VEA or IEFA in this asset class.
Emerging Market Stock ETFs
Broad Base Emerging Market Stock ETF Performance Comparison (as of 11/02/2015):
| Ticker/Portfolio Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR | 10Yr Sharpe |
|---|---|---|---|---|---|---|
| IEMG (iShares Core MSCI Emerging Markets) (Fidelity) | -9.1% | -13.8% | -2.5% | |||
| SCHE (Schwab Emerging Markets Equity ETF) (Schwab) | -10.8% | -14.8% | -2.8% | -3.2% | ||
| VWO (Vanguard FTSE Emerging Markets ETF) (Vanguard, TD, Etrade, Six Core, MyPlanIQ, Retirement ETFs) | -10.8% | -15.2% | -2.8% | -3.0% | 5.4% | 0.14 |
| EEM (iShares MSCI Emerging Markets) | -10.6% | -15.1% | -3.6% | -3.6% | 4.9% | 0.12 |
Schwab ETF again delivers a similar return as Vanguard VWO. It is also very clear that the oldest (and still the most popular) ETF EEM in this category has done worse, solely because of its higher expense than VWO (0.68% vs. 0.15%). There is really no point to invest in EEM unless you are a frequent trader.
Real Estate ETFs
US Real Estate ETFs Performance Comparison (as of 11/02/2015):
| Ticker/Portfolio Name | YTD Return** |
1Yr AR | 3Yr AR | 3Yr Sharpe | 5Yr AR | 10Yr AR |
|---|---|---|---|---|---|---|
| IYR (iShares US Real Estate) (Fidelity) | 0.7% | 5.1% | 10.1% | 0.73 | 10.6% | 6.3% |
| SCHH (Schwab US REIT ETF) (Schwab) | 4.9% | 9.2% | 13.0% | 0.86 | ||
| VNQ (Vanguard REIT ETF) (Vanguard, TD, Six Core, MyPlanIQ, Retirement ETFs) | 1.2% | 6.5% | 11.4% | 0.78 | 11.6% | 7.7% |
| RWR (SPDR Dow Jones REIT ETF) (Etrade) | 2.5% | 8.2% | 12.5% | 0.84 | 12.3% | 7.4% |
For US REIT ETFs, Schwab ETF had the best 1 and 3 year returns. It tracks Dow Jones REIT Index, which is the same one RWR is tracking. However, SCHH has a much lower expense (0.07% vs. 0.25%). Again, it is also clear investors should abandon IYR if it is possible as it charges high expense (0.43%) and instead, choosing either VNQ or SCHH.
International Real Estate ETFs Performance Comparison (as of 11/02/2015):
| Ticker/Portfolio Name | YTD Return** |
1Yr AR | 3Yr AR | 3Yr Sharpe | 5Yr AR | 10Yr AR |
|---|---|---|---|---|---|---|
| IFGL (iShares International Dev Rel Est) (Fidelity) | -0.0% | -0.9% | 4.2% | 0.3 | 4.4% | |
| RWO (SPDR Dow Jones Global Real Estate ETF) (Schwab, Etrade) | 2.1% | 4.9% | 9.3% | 0.7 | 9.3% | |
| VNQI (Vanguard Global ex-US Real Estate ETF) (TD, MyPlanIQ, Six Core, Retirement ETFs) | 1.3% | 0.3% | 4.8% | 0.33 |
Notice RWO is a global Real Estate ETF, which invests in both the US and international REITs and other Real Estate properties. So its outperformance is not comparable with VNQI and IFGL. In general, we prefer VNQI as it has only half of the expense of IFGL (0.24% vs. 0.48%).
Broad Base US Bond Index ETFs
Broad Base US Bond ETF Performance Comparison (as of 11/02/2015):
| Ticker/Portfolio Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 5Yr Sharpe | 10Yr AR |
|---|---|---|---|---|---|---|
| AGG (iShares Core US Aggregate Bond) (Fidelity, Etrade) | 1.1% | 1.8% | 1.7% | 2.9% | 0.84 | 4.5% |
| SCHZ (Schwab US Aggregate Bond ETF) (Schwab) | 1.0% | 1.9% | 1.6% | |||
| BND (Vanguard Total Bond Market ETF) (TD, MyPlanIQ, Six Core, Retirement ETFs) | 1.1% | 1.6% | 1.2% | 2.7% | 0.77 |
Schwab ETF SCHZ has performed reasonably well. However, BND is a slight disappointment, compared with AGG. It has a slight expense advantage (0.07% vs. AGG’s 0.08%). But AGG has withstood BND’s challenge. In our opinion, both ETFs are fine.
To summarize, based on our reviews on the key asset class core ETFs, we believe most of them are very comparable. The only major outlier is that Schwab’s international stock ETF has been a laggard. This is somewhat remedied by Schwab’s better REIT ETFs. Vanguard ETFs are still the go to family while iShares core ETFs are catching up.
Market Overview
US stocks are back in up trends. Furthermore, we are now entering the period of a year that usually delivers the strongest stock performance. Economy wise, consumer spending has been strong, both in the US and in China. Europe is meandering through. However, we don’t believe that we are in a clear sky ahead. In fact, as it has been for the past 6 years, we are in a unstable position where the economy can be easily tipped over. Caution is still warranted.
For more detailed asset trend scores, please refer to 360° Market Overview.
We would like to remind our readers that markets are more precarious now than other times in the last 5 years. It is a good time and imperative to adjust to a risk level you are comfortable with right now. However, recognizing our deficiency to predict the markets, we will stay on course.
We again copy our position statements (from previous newsletters):
Our position has not changed: We still maintain our cautious attitude to the recent stock market strength. Again, we have not seen any meaningful or substantial structural change in the U.S., European and emerging market economies. However, we will let markets sort this out and will try to take advantage over its irrational behavior if it is possible.
We again would like to stress for any new investor and new money, the best way to step into this kind of markets is through dollar cost average (DCA), i.e. invest and/or follow a model portfolio in several phases (such as 2 or 3 months) instead of the whole sum at one shot.
Latest Articles
- October 26, 2015: Total Return Bond Fund Review
- October 19, 2015: Advanced Portfolio Review
- October 12, 2015: What About Commodities?
- October 5, 2015: Core Satellite Portfolios In A 401k Account
- September 28, 2015: Risk Managed Strategic Asset Allocation Portfolios Revisited
- September 21, 2015: Quest For The Best Investment Strategy
- September 14, 2015: Core Satellite Portfolios In Market Turmoil
- September 7, 2015: Market Rout Creates An Opportunity to Reposition Your Portfolios
- August 31, 2015: Review of Asset Allocation Funds and Portfolios
- August 24, 2015: Market Rout And Your Portfolios
- August 17, 2015: ETF or Mutual Fund Based Portfolios
- August 10, 2015: Updated Newsletter Collection
- August 3, 2015: Slippery Asset Trends
- July 27, 2015: Performance Dispersion Among Momentum Based Portfolios
- July 20, 2015: Global Balanced Portfolio Benchmarks
- July 13, 2015: Pain in Tactical Portfolios
- July 6, 2015: Fixed Income Total Return Bond Funds In Strategic Asset Allocation Portfolios
- June 29, 2015: Core ETF Commission Free Portfolios
- June 22, 2015: Secular Asset Trends
- June 15, 2015: Giving Up Bonds?
- June 1, 2015: Summer Blues?
- May 26, 2015: Cash, Bonds and Stocks In A Rising Rate Environment
- May 18, 2015: Portfolio Update
- May 11, 2015: Pain in Fixed Income?
- May 4, 2015: The Balanced Stock and Long Term Treasury Bond Portfolios
- April 27, 2015: Long Term Treasury Bond Behavior
- April 20, 2015: 529 College Savings Plan Rebalance Policy Change
- April 13, 2015: Total Return Bond Funds As Smart Cash
- April 6, 2015: The Low Return Environment
- March 30, 2015: Brokerage Specific Core Mutual Fund Portfolios 2
- March 23, 2015: Investment Arithmetic for Long Term Investments
- March 16, 2015: Brokerage Specific Core Mutual Fund Portfolios
- March 9, 2015: Newsletter Collection Update
- March 2, 2015: Total Return Bond ETFs
- February 23, 2015: Why Is Global Tactical Asset Allocation Not Popular?
- February 16, 2015: Where Are Permanent Portfolios Going?
- February 9, 2015: How Have Asset Allocation Funds Done?
- February 2, 2015: Risk Management Everywhere
- January 26, 2015: Composite Portfolios Review
- January 19, 2015: Fixed Income Investing Review
- January 12, 2015: How Does Trend Following Tactical Asset Allocation Strategy Deliver Returns
- January 5, 2015: When Forecast Fails
- December 22, 2014: Long Term Asset Returns: How Long Is Long?
- December 15, 2014: Beaten Down Assets
- December 8, 2014: Implementing Core Asset Portfolios In a Brokerage
- December 1, 2014: Two Key Issues of Investment Strategies
- November 24, 2014: Holiday Readings
- November 17, 2014: Retirement Spending Portfolios Update
- November 10, 2014: Fixed Income Or Cash
- November 3, 2014: Asset Trend Review
- October 27, 2014: Investment Loss, Mistakes And Market Cycles
- October 20, 2014: Strategic Portfolios With Managed Volatility
- October 13, 2014: Embrace Volatility
- October 6, 2014: Tips For 401k Open Enrollment
- September 29, 2014: What Can We Learn From Bill Gross’ Departure From PIMCO?
- September 22, 2014: Why Total Return Bond Funds?
- September 15, 2014: Equity And Total Return Bond Fund Composite Portfolios
- September 8, 2014: Momentum Based Portfolios Review
- September 1, 2014: Risk & Diversification: Mint.com Interview
- August 25, 2014: Remember Risk
- August 18, 2014: Consistency, The Most Important Edge In Investing: Tactical Case
- August 11, 2014: What To Do In Overvalued Stock Markets
- August 4, 2014: Is This The Peak Or Correction?
- July 28, 2014: Stock Musings
- July 21, 2014: Permanent Portfolios & Four Pillar Foundation Based Framework
- July 14, 2014: Composite Portfolios Review
- July 7, 2014: Portfolio Behavior During Market Corrections
- June 30, 2014: Half Year Brokerage ETF and Mutual Fund Portfolios Review
- June 23, 2014: Newsletter Collection Update
- June 16, 2014: There Are Always Lottery Winners
- June 9, 2014: The Arithmetic of Investment Mistakes
- June 2, 2014: Tips On Portfolio Rebalance
- May 26, 2014: In Praise Of Low Cost Core Asset Class Based Portfolios
- May 19, 2014: Consistency, The Most Important Edge In Investing: Strategic Case
- May 12, 2014: How To Handle An Elevated Overvalued Market
- May 5, 2014: Asset Allocation Funds Review
- April 28, 2014: Now The Economy Backs To The ‘Old Normal’, Should Our Investments Too?
- April 21, 2014: Total Return Bond Investing In The Current Market Environment
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