Re-balance Cycle Reminder All MyPlanIQ’s newsletters are archived here.
For regular SAA and TAA portfolios, the next re-balance will be on Tuesday, January 3, 2017. You can also find the re-balance calendar for 2016 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.
Index ETFs Review
In our brokerage specific investment plans, we mostly use index ETF to construct portfolios. It’s our intention to review these funds regularly. Last time, we reviewed them in November 2, 2015: Broad Base Index Core ETFs Review.
US Equity
The following table compares broad base US stock index ETFs:
US Equity Index ETF Performance Comparison (as of 11/25/2016):
ETF | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 5Yr Sharpe | 10Yr AR |
---|---|---|---|---|---|---|
IVV (iShares Core S&P 500) | 10.4% | 8.2% | 9.3% | 16.1% | 1.21 | 6.9% |
SCHB (Schwab US Broad Market ETF) | 10.7% | 8.0% | 8.8% | 16.1% | 1.2 | |
VTI (Vanguard Total Stock Market ETF) | 11.4% | 8.7% | 9.0% | 16.3% | 1.21 | 7.2% |
SPY (SPDR S&P 500 ETF) | 10.3% | 8.1% | 9.2% | 16.1% | 1.22 | 6.9% |
VOO (Vanguard S&P 500 ETF) | 10.5% | 8.2% | 9.1% | 16.1% | 1.21 |
The three ETFs that track S&P 500 are pretty comparable, indicating that for this widely tracked large cap company stock index, ETFs are very mature. VTI (Vanguard Total Stock Market ETF) has been better than Schwab’s broad base ETF SCHB. Furthermore, the recent small cap strength and its long term strength makes VTI have done better than large cap indexes such as S&P 500 SPY, VOO alike.
We also use several dividend and low volatility ETFs:
ETF | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 5Yr Sharpe | 10Yr AR |
---|---|---|---|---|---|---|
SPLV (PowerShares S&P 500 Low Volatility ETF) | 8.2% | 8.0% | 10.0% | 14.2% | 1.24 | |
USMV (iShares MSCI USA Minimum Volatility) | 8.7% | 8.9% | 10.4% | 14.9% | 1.39 | |
VYM (Vanguard High Dividend Yield ETF) | 14.1% | 12.8% | 9.7% | 16.0% | 1.32 | 7.2% |
VIG (Vanguard Dividend Appreciation ETF) | 11.4% | 10.0% | 0.9% | 13.3% | 0.65 | 7% |
DVY (iShares Select Dividend) | 19.4% | 17.6% | 10.9% | 16.0% | 1.36 | 6.1% |
SDY (SPDR S&P Dividend ETF) | 18.7% | 16.8% | 10.8% | 16.0% | 1.32 | 7.8% |
SCHD (Schwab US Dividend Equity ETF) | 14.5% | 13.2% | 9.1% | 15.4% | 1.31 | |
FVD (First Trust Value Line Dividend ETF) | 16.8% | 15.6% | 11.6% | 16.0% | 1.42 | 8.3% |
The two low volatility ETFs are again comparable. However, Vanguard’s two dividend ETFs have lagged behind other dividend ETFs. This is mostly due to the overweight on energy and financial dividend paying companies by the other four ETFs (DVY, SDY, SCHD and FVD). We added FVD to the comparison because we are curious how this famed ETF with long history has done. We stopped using this ETF as it has low trading volume. Schwab dividend ETF has somewhat lagged behind DVY and SDY. In general, we believe using these ETFs as candidate funds and rotating them based on their trend score can add value to a portfolio. Furthermore, we are still a believer in the two Vanguard’s dividend ETFs because of their solid indexing history and low cost.
International Developed Market Stock ETFs
We again find that there is much more dispersion among international developed market stock broad base ETFs:
ETF | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 5Yr Sharpe | 10Yr AR |
---|---|---|---|---|---|---|
IEFA (iShares Core MSCI EAFE) | -1.0% | -2.8% | -1.3% | |||
SCHF (Schwab International Equity ETF) | 0.6% | -2.0% | -1.7% | 6.9% | 0.42 | |
VEA (Vanguard FTSE Developed Markets ETF) | 0.2% | -2.1% | -1.3% | 7.9% | 0.47 | |
EFA (iShares MSCI EAFE) | -1.3% | -3.7% | -2.0% | 7.4% | 0.44 | 0.8% |
VEA (Vanguard FTSE Developed Markets ETF) has been an undisputed leader in this pack. Schwab’s SCHF has been comparable for the past one year even though it was a laggard previously. We believe this ETF will be fine in the future. However, for other ETFs (IEFA and EFA), we see no reason to use them if one can invest in VEA.
Emerging Market Stock ETFs
This year’s data are again showing what we observed last time:
ETF | YTD Return** |
1Yr AR | 3Yr AR | 3Yr Sharpe | 5Yr AR | 10Yr AR |
---|---|---|---|---|---|---|
IEMG (iShares Core MSCI Emerging Markets) | 9.7% | 3.9% | -2.7% | -0.14 | ||
SCHE (Schwab Emerging Markets Equity ETF) | 12.5% | 6.3% | -1.7% | -0.09 | 2.2% | |
VWO (Vanguard FTSE Emerging Markets ETF) | 12.2% | 6.2% | -1.5% | -0.08 | 2.5% | 2.3% |
EEM (iShares MSCI Emerging Markets) | 10.4% | 4.0% | -3.3% | -0.17 | 1.6% | 1.7% |
Takeaway:
- Vanguard and Schwab ETFs (VWO and SCHE) are the two clear leaders.
- SCHE is now matching closely with VWO, so we can assume its early underperformance has been largely corrected.
- IEMG is clearly not in the same league and very disappointing, especially considering it’s from iShares.
- EEM is again a trader’s ETF solely because of its popularity (trading volume). But even in liquidity, VWO is now very comparable with EEM.
Real Estate ETFs
US Real Estate ETFs Performance Comparison (as of 11/25/2016):
ETF | Expense | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR |
---|---|---|---|---|---|---|
IYR (iShares US Real Estate) | 0.44% | 2.8% | 4.1% | 10.0% | 12.0% | 2.9% |
SCHH (Schwab US REIT ETF) | 0.07% | 1.1% | 3.4% | 11.6% | 13.0% | |
VNQ (Vanguard REIT ETF) | 0.12% | 3.3% | 5.3% | 10.8% | 12.8% | 4.3% |
RWR (SPDR Dow Jones REIT ETF) | 0.25% | 1.1% | 3.3% | 11.5% | 12.8% | 3.7% |
Schwab ETF is slightly better than RWR. Both track the same Dow Jones REIT Index, which is the same one RWR is tracking. In terms of expenses, Schwab’s SCHH is way better (smaller) than others. We maintain our preference of VNQ and SCHH over the other two.
International Real Estate ETFs Performance Comparison (as of 11/25/2016):
ETF | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR |
---|---|---|---|---|
IFGL (iShares International Dev Rel Est) | -0.4% | -1.8% | -0.7% | 8.0% |
RWO (SPDR Dow Jones Global Real Estate ETF) | -0.5% | -0.0% | 6.0% | 10.7% |
VNQI (Vanguard Global ex-US Real Estate ETF) | 1.0% | -0.7% | 0.5% | 9.0% |
We again prefer VNQI in this category. RWO outperformed others because it’s a global REIT fund, thus benefiting from US REITs’ stronger performance.
Broad Base US Bond Index ETFs
In this category, the oldest and most popular iShares AGG ETF is still slightly better than Vanguard’s popular BND:
Broad Base US Bond ETF Performance Comparison (as of 11/25/2016):
ETF | Expense | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR |
---|---|---|---|---|---|---|
AGG (iShares Core US Aggregate Bond) | 0.05% | 2.1% | 1.9% | 2.6% | 2.2% | 4.1% |
SCHZ (Schwab US Aggregate Bond ETF) | 0.04% | 1.9% | 1.8% | 2.6% | 2.1% | |
BND (Vanguard Total Bond Market ETF) | 0.06% | 2.0% | 1.8% | 2.5% | 1.9% |
Schwab SCHZ is again a laggard, but not so much worse than the other two. Unlike last year, AGG now has lower expense than BND (0.05% vs. 0.06%) while Schwab’s SCHZ has the lowest expense ratio (0.04%). In our opinion, all three ETFs are good enough for the broad base US bond index representation.
To summarize, most of these ETFs are very comparable but there are some that can be clearly replaced (such as EEM or IYR). Schwab’s ETFs are now formidable competitors.
Market Overview
US stocks continued to make record high. International stocks recovered somewhat after the Trump election loss. Bonds continued their loss out of investors’ concern on inflation and possible higher borrowing cost in the new administration’s upcoming investment driven economy. As we stated before, there will be many bumps ahead. Furthermore, as the US stocks are highly overvalued, we maintain our cautiously optimistic position.
For more detailed asset trend scores, please refer to 360° Market Overview.
As now we have a president elect who promised to challenge the status quo and make substantial structural change (such as infrastructure building), we are now in a wait and see period: as the nation is posed to invest, the most important factor to watch is how productive the investments will be. Simply put, productive investments will result in better return on investment (ROI), tangibly or intangibly. They should also increase productivity that in turns will improve our standard of living. Capital misallocation can result in a higher growth but might not improve the real standard of living, which is the ultimate goal of economic activities.
In terms of investments, U.S. stock valuation is at a historically high level. It is thus not a good time to take excessive risk. However, we remain optimistic on U.S. economy in the long term and believe much better investment opportunities will arise in the future.
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
- November 21, 2016: International Exposure Of U.S. Large Companies
- November 7, 2016: Rising Rate And Current Bond Trend
- October 31, 2016: Economy Power And Long Term Stock Returns
- October 24, 2016: Current Commodity Trend And Managed Futures
- October 17, 2016: Investment Mistakes And Good Or Bad Investment Strategies
- October 10, 2016: Momentum Investing Review
- October 3, 2016: Survey & Feedback
- September 26, 2016: Fixed Income Investing: Actively Managed Funds vs. Index Funds
- September 19, 2016: Stock Investing: Actively Managed Funds vs. Index Funds
- September 12, 2016: Newsletter Update
- September 5, 2016: Overvalued Markets And Long Term Timing Strategies
- August 29, 2016: Your 401K Finally Draws Attention
- August 22, 2016: Inflation Protected Securities TIPS For Current Overvalued Markets
- August 15, 2016: Risk On: Emerging Market Stocks And Small Cap Stocks
- August 8, 2016: Portfolio Construction Using Stock ETFs And Bond Mutual Funds
- August 1, 2016: Adding Value To Your Own Investments
- July 25, 2016: Tactical Asset Allocation Funds Review
- July 18, 2016: Strategic Asset Allocation & Lazy Portfolio Review
- July 11, 2016: Asset Trend Review
- June 27, 2016: Secular Cycles For Tactical And Strategic Investment Strategies
- June 20, 2016: A World of Debt
- June 13, 2016: Managed Futures For Portfolio Building
- June 6, 2016: Newsletter Summary
- May 30, 2016: Swensen Portfolio And Permanent Portfolios
- May 23, 2016: AAII Article And Some Web Changes
- May 16, 2016: The PIMCO (Dis)Advantages
- May 9, 2016: Boost Your Dull Summer Investments
- May 2, 2016: Low Cost Index Fund Investing
- April 25, 2016: Tax Free Municipal Bond Funds & Portfolios
- April 18, 2016: Asset Class Trend Review
- April 11, 2016: Construction of Sound And Conservative Portfolios
- March 28, 2016: Total Return Bond ETFs Review
- March 21, 2016: Small And Large Company Stock Performance In Different Economic Expansion Cycles
- March 14, 2016: Are Tactical And Timing Strategies Losing Steam?
- March 7, 2016: Defined Maturity Bond Fund Analysis
- February 29, 2016: Smart Strategic Asset Allocation Rebalance When Market Trend Changes
- February 22, 2016: Be Cash Smart
- February 15, 2016: Bond ETF Portfolios
- February 8, 2016: Newsletter Collection Update
- February 1, 2016: Total Return Bond Fund Portfolios In A Volatile Period
- January 25, 2016: Alternative Portfolios Review
- January 18, 2016: Strategic Asset Allocation: A Cautious Outlook
- January 11, 2016: Review Of Trend Following Tactical Asset Allocation
- January 4, 2016: What Worked And Didn’t In 2015
- December 21, 2015: Distressed Assets
- December 14, 2015: High Yield Bonds And Their Correlation With Stocks
- December 7, 2015: Diversification And Global Allocation
- November 30, 2015: Investors and Speculators Combined
- November 23, 2015: Active Stock Fund Performance Consistency
- November 16, 2015: Permanent, Risk Parity And Alternative Portfolios Review
- November 9, 2015: Broad Base Core Mutual Fund Review
- November 2, 2015: Broad Base Index Core ETFs Review
- 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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