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, December 14, 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 Core Mutual Fund Review

Similar to the previous newsletter November 2, 2015: Broad Base Index Core ETFs Review, in this newsletter, we extend our review to the core mutual funds used in major brokerage plans. These core mutual funds are picked to represent major asset classes. 

Readers might notice that we didn’t use Index word for these core mutual funds. This is due to the fact that many major brokerages do not actually provide low cost index funds such as Vanguard mutual funds as their transaction free funds. Surprise! Certainly we can understand the competition because firms like Schwab and Fidelity have their own funds to sell. 

We still do not recommend a TD Ameritrade mutual fund plan due to its excessive minimum holding period (6 month) requirement. For TD Ameritrade, however, using its extensive commission free ETF line up is good enough to construct asset allocation portfolios with core index ETFs. 

US Equity

The following table compares core mutual funds representing US Equity asset class:

US Equity Core Fund Performance Comparison (as of 11/06/2015):
Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 10Yr AR Expense Ratio
FUSEX (Fidelity Spartan 500 Index Inv)(Fidelity) 3.7% 5.4% 16.0% 13.6% 7.7% 0.09%
SWPPX (Schwab S&P 500 Index) (Schwab) 3.6% 5.4% 16.0% 13.6% 7.8% 0.09%
VFINX (Vanguard 500 Index Investor) (Vanguard) 3.6% 5.4% 16.0% 13.6% 7.7% 0.17%
PREIX (T. Rowe Price Equity Index 500) (Etrade, Merrill Edge) 3.5% 5.2% 15.8% 13.4% 7.6% 0.27%
PSPDX (PIMCO StocksPLUS D) (Fidelity, Schwab, Merrill, Etrade) 2.3% 3.9% 15.7% 13.9% 7.8% 0.9%

All of these funds are tracking S&P 500 index. They have performed very similarly. The only outlier here is the PIMCO PSPDX, it uses S&P 500 futures and short term bond portfolio to track and out perform S&P 500.  Such a technique can in general enhance returns, especially in a period where fixed income can deliver better than short term cash. As interest rates pose to increase, this fund might encounter more difficulties ahead. In fact, year to date, this fund has had some under performance because of the fixed income volatility. However, from a long term perspective, it is worth to have such a fund as a candidate to get a performance boost. 

Schwab’s SWPPX has done the best simply because of its lowest expense ratio. However, PIMCO’s fund has charged way too high expense, compared with the other funds. So far, it has shown it can barely out perform others even after the fee. However, this is still a big concern. We also note many of these funds have institutional class or a different class for higher minimum amount invested. They have lower fees in these class funds. 

We are also disappointed by the choices in Etrade and Merrill Edge: their T. Rowe Price PREIX is still charging too much compared with others. For a fund with identical tracking index, there is no excuse to charge higher expense. 

The following table compares total stock market funds in these brokerage plans (as 11/09/2015):

Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 10Yr AR Expense Ratio
FSTMX (Fidelity Spartan Total Market Index Inv) (Fidelity) 3.2% 5.0% 15.9% 13.5% 8.0% 0.10%
SWTSX (Schwab Total Stock Market Index) (Schwab) 3.1% 5.0% 15.9% 9.5% 6.1% 0.09%
NOSIX (Northern Stock Index) (Etrade) 3.7% 5.4% 16.0% 13.6% 7.6% 0.10%
POMIX (T. Rowe Price Total Equity Market Idx) (Merrill Edge) 3.1% 4.9% 16.0% 9.0% 5.8% 0.35%
VTSMX (Vanguard Total Stock Mkt Idx Inv) (Vanguard) 3.0% 5.4% 16.0% 13.5% 8.0% 0.17%

Among these funds, T. Rowe Price POMIX again has the highest expense ratio. Vanguard and Fidelity funds are still the most reliable for now. However, one can see with the recent push of low cost funds, Schwab and Nothern index funds are catching up. 

International Developed Market Stock Mutual Funds

In the international developed market stock funds, things are getting more complicated.

International Developed Market Stock Mutual Fund Performance Comparison (as of 11/09/2015):

Fund Name YTD
1Yr AR 3Yr AR 5Yr AR 10Yr AR Expense Ratio
SWISX (Schwab International Index) (Schwab) 1.4% -0.6% 7.2% 3.8% 3.9% 0.19%
PPUDX (PIMCO Intl StkPLUS TR Strat (Unhedged) D) (Schwab, Fidelity) -3.5% -5.3% 5.8% 4.1%   1.04%
PIPDX (PIMCO International StocksPLUS TR Str D) (Schwab, Fidelity, Etrade) 3.6% 4.2% 12.4% 8.1% 7.2% 1.15%
FSIIX (Fidelity Spartan International Index Inv) (Fidelity) 1.3% -0.5% 7.3% 3.8% 3.9% 0.2%
PIEQX (T. Rowe Price International Eq Index) (Merrill) 1.9% -0.1% 6.8% 3.5% 3.9% 0.5%
VGTSX (Vanguard Total Intl Stock Index Inv) (Vanguard) -1.6% -3.4% 4.4% 1.8% 3.8% 0.22%
VDVIX (Vanguard Developed Markets Idx Investor) (Etrade) 1.1% -0.8%       0.2%

Investors should pay attention to the currency fluctuation in international investments. Most funds in the above table are unhedged, meaning they are subject to us dollar exchange rate change. PIMCO PIPDX is a hedged fund that essentially reflects how its underlying investments are in their local currencies. In local euro market, for example, equities have done well this year but because of the Euro depreciation against US dollar this year, all of the unhedged funds have performed worse. Both PIMCO funds use futures and a bond portfolio to mimic an index. Again, both have extremely high expense ratios, compared with other funds. 

Vanguard Total Intl Stock Index (VGTSX) invests a portion in emerging market stocks, so it is not a strict developed market stock index fund, compared with VDVIX or its ETF VEA. 

T. Rowe Price index fund PIEQX should reduce its expense ratio to be more competitive. 

Emerging Market Stock Mutual Funds 

Unfortunately, in emerging market stock investing, index funds are not necessarily the best choice: 

Emerging Market Stock Fund Performance Comparison (as 11/09/2015):
Fund Name YTD
1Yr AR 3Yr AR 5Yr AR 10Yr AR Expense Ratio
FPEMX (Fidelity Spartan EMkts Idx Inv) (Fidelity) -11.1% -14.0% -3.3%     0.31%
ODMAX (Oppenheimer Developing Markets A) (Schwab) -8.9% -14.8% -1.2% -1.1% 7.8% 1.30%
NOEMX (Northern Emerging Markets Equity Index) (Etrade) -10.2% -13.1% -3.6% -4.3%   0.3%
VEIEX (Vanguard Emerging Mkts Stock Idx) (Vanguard) -10.7% -13.4% -3.0% -3.9% 4.9% 0.33%
PRMSX (T. Rowe Price Emerging Markets Stock) (Etrade, Merrill) -5.9% -9.1% -1.8% -8.8% 1.3% 1.24%
SSEMX (SSgA Emerging Markets Instl) (Etrade, Schwab, Merrill) -9.78% -12.3% -4.5% -5.1% 3.7% 1.2%

It is very clear that the actively managed Oppenheimer ODMAX has out performed all other funds for the past 3, 5 10 years by some large margins. However, Vanguard emerging market index fund VEIEX is still a reliable performer with its low fee and a better track record in indexing. For investors in Fidelity and Etrade, they can invest in an index fund that charges a very low fee. However, for Merrill Edge investors, the choices in this asset class is not satisfactory. 

Real Estate Mutual Funds

Real Estate Mutual Fund Performance Comparison (as of 11/09/2015):
Fund Name YTD
1Yr AR 3Yr AR 5Yr AR 10Yr AR Expense Ratio
PETDX (PIMCO Real Estate Real Return Strategy D) (Schwab) 0.3% 3.2% 7.1% 13.0% 9.7% 1.14%
FRXIX (Fidelity Spartan Real Estate Idx Inv) (Fidelity) 0.5% 4.3% 11.0%     0.23%
CSRSX (Cohen & Steers Realty Shares) (Schwab, Fidelity) 1.2% 5.5% 11.5% 10.3% 8.2% 0.97%
SSREX (SSgA Tuckerman Active REIT Instl) (Etrade, Merrill) 0.7% 5.1% 11.2% 11.0% 6.7% 1.00%
VGSIX (Vanguard REIT Index Inv) (Vanguard) -1.0% 2.9% 10.5% 10.4% 7.7% 0.26%
TCREX (TIAA-CREF Real Estate Sec Retail) (Merrill) 0.9% 4.7% 10.0% 10.3% 6.9% 0.83%

In this category, most funds charge very high fees. Fidelity FRXIX has the lowest fee, followed by Vanguard VGSIX. Cohen & Steers CSRSX uses a systematic (but proprietary) investment methodology to invest in REITs. Based on its description and its holdings, one can see it uses a earnings growth methodology (thus more akin to a growth fund). It has managed to out perform the low cost Vanguard REIT index fund by 2% every year for the past 10 years. In our opinion, this fund, similar to Oppenheimer emerging market fund mentioned above, does show that it is not always the best to just use capitalization weighted index approach.

PIMCO PETDX uses a pool of REIT linked derivatives and inflation protected bonds and other fixed income bonds to try to beat an index. So far, it has managed to best other funds for the past 5 and 10 years. However, investors should be aware that this fund should be used just as a candidate fund as a substitute. Its recent (under)performance has shown it can deviated from other REITs when bond markets are volatile. Again, it is our belief that this fund can do well in a long term. 


We make the following observations: 

  • In the US stock category, index funds have been very competitive and mature across major brokerages. 
  • In both emerging market and REITs, other ‘unconventional’ or proprietary indexing based approaches can do better than a conventional index fund. However, these funds should be used as a supplement or candidate fund instead. 
  • PIMCO has used derivatives + bond portfolios approach to beat an index fund. We believe the approach has done well enough to warrant to have their funds included in the core mutual fund plans. 

Market Overview

The blow out payroll number last Thursday has caused bipolar responses: on one hand, it shows economy is on a solid footing and it does have its own momentum. On the other hand, it lays down the foundation for the Federal Reserve to raise the short term interest rate in December. As pointed out by Hussman, payroll indicator is a very lagging indicator and so far, many leading indicators are pointing to a sluggish economy. Market forces are at work to make a guess on the direction. For now, we shall stick to our plan. 

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. 

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