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, September 5, 2017. You can also find the re-balance calendar for 2017 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.
Fidelity Commission Free ETFs Update
At MyPlanIQ, we are always monitoring commission free ETFs and index fund expenses. In this newsletter, we look at the recent development in Fidelity, one of the major brokerages.
A reader of our recent AAII computerized investing article made a comment on our statement on Fidelity commission free ETFs. We published our response below:
A user recently told us that the statement “Fidelity offers half-baked commission-free ETF trades that are only buy commission-free, but not sell commission-free.” in the article is misleading. He believes that Fidelity offers ETFs that are commission free in both purchase and sell trades.
Here is our answer:
We have monitored Fidelity commission free ETFs since the days they were introduced. Fidelity went through commission free (both purchase and sell) and then commission free purchase but sell with a commission till last year sometime. Apparently, recently, they changed the policy to
commission free purchase and sell with some activity fees (0.01 – 0.03 per $1000, so $100,000 would be charged $1-$3).
This is true even after you have held shares for more than 30 days. So it’s still not entirely commission free but now it’s close.
See foot print on page https://www.fidelity.com/etfs/overview :
Free commission offer applies to online purchases of Fidelity ETFs and select iShares ETFs in a Fidelity brokerage account. Fidelity accounts may require minimum balances. The sale of ETFs is subject to an activity assessment fee (from $0.01 to $0.03 per $1,000 of principal). iShares ETFs and Fidelity ETFs are subject to a short-term trading fee by Fidelity if held less than 30 days.
We wrote the piece late last year and the information was correct at that time.
So Fidelity now changed back to more or less commission free ETFs even for sales of these ETFs (strictly speaking, this is still not 100 commission free for ETF sales). We are encouraged by this development, even though we dislike its change of heart in the past.
Here are some more details on Fidelity commission free ETFs (see Fidelity web page):
Since Fidelity offers its own ETFs, they naturally use the commission free mechanism to promote their own ETFs, even though most of their ETFs are very new and have limited liquidity (trading volume) at this moment. We don’t find most of these new and obscure ETFs appealing. For example, even though its expense ratio 0.084% is lower than 0.12% of VNQ (Vanguard REIT ETF), FREL (Fidelity MSCI Real Estate ETF) has less than 100,000 daily volume, making it very hard to rebalance/trade. On the other hand, a more established Fidelity Nasdaq 100 ETF ONEQ’s expense ratio 0.21% is still higher than the famous QQQ’s 0.20%.
For Fidelity ETFs, the only one we find to be useful is FBND (Fidelity Total Bond ETF), an actively managed total return bond fund, which was covered in our previous newsletter February 27, 2017: Fidelity Total Bond Fund Review.
We find Fidelity’s commission free iShares ETFs more attractive: they include some of more established and more liquid iShares ETFs for domestic stocks and bonds. The following table shows how the foreign ETFs are compared with Vanguard’s.
Ticker/Portfolio Name | Expense Ratio | Average Daily Volume | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR |
---|---|---|---|---|---|---|---|
IEFA (iShares Core MSCI EAFE) | 0.12% | 4,534,807 | 15.1% | 13.7% | 3.3% | ||
VEA (Vanguard FTSE Developed Markets ETF) | 0.07% | 7,729,736 | 16.2% | 14.8% | 3.6% | 8.5% | 2.0% |
EFA (iShares MSCI EAFE) | 0.33% | 18,547,766 | 14.2% | 13.0% | 2.4% | 7.7% | 1.5% |
IEMG (iShares Core MSCI Emerging Markets) | 0.14% | 7,360,107 | 21.8% | 15.0% | 1.3% | ||
VWO (Vanguard FTSE Emerging Markets ETF) | 0.14% | 10,535,455 | 19.5% | 13.5% | 1.1% | 3.3% | 2.0% |
EEM (iShares MSCI Emerging Markets) | 0.72% | 50,899,147 | 22.6% | 15.4% | 0.8% | 2.9% | 2.0% |
The good news here is that both IEFA and IEMG in the Fidelity commission free ETFs are now catching up with Vanguard’s ETFs, both in terms of expense ratio and average volume. Notice the difference between IEFA and EFA, besides their expense ratios, is that IEFA has more exposure to small cap stocks. This makes it less liquid but on the other hand, it should deliver slightly higher returns in a long term. So for strategic asset allocation portfolios that rebalance only once a year or so, IEFA is actually better than EFA. Similarly, the difference between IEMG and EEM, in addition to their expense ratios, is that IEMG invests more in small cap stocks.
Notice IEMG and VWO are tracking two different indexes (MSCI Emerging Markets and FTSE Emerging Markets respectively). Some interesting facts:IEMG had no exposure in Chinese A-shares exposure until recently. The other is that VWO has no South Korea’s exposure at all as FTSE index does not consider South Korea as an emerging market.
Unfortunately, we find the lineup has a major missing piece: US REITs. FREL (Fidelity MSCI Real Estate ETF) in the commission free list has extremely low daily trading volume (130k) and low total assets ($390 million), making it not very useful for portfolio construction at all. Fidelity users are forced to pay $4.95 commission if they want to use more established one such as Vanguard REITs VNQ. The commission free ETFs include IFGL (iShares International Dev Rel Est), an international REIT index fund. This somewhat remedies the lack of REITs representation. Nevertheless, missing US REITs representation is a major drawback in the list.
Finally, we want to emphasize again that investors should not be lured away to the low volume, high expense or too special ETFs just because they are commission free. The price you pay for your portfolios will be much higher than the commissions you save for these ETFs.
In a future newsletter, we will look at the funds in Schwab, another major brokerage.
Market Overview
Last week, stocks exhibited some volatility: S&P 500 index dropped 1.4% on Thursday alone, which seems to be a ‘large’ loss. However, we should be reminded that in many other periods, a daily 1% fluctuation is actually very common. Most financial media attributed the drop to the geopolitical uncertainty between the US and North Korea. No one can be certain whether this was the real trigger, but one thing is for sure: when markets have been elevated for so long at a historically high valuation level, they become more unstable and can be more likely subject to sudden loss. We shall stay the course and respond to market trends accordingly.
For more detailed asset trend scores, please refer to 360° Market Overview.
Now that the Trump administration has been in the office for more than half a year, it has stumbled and encountered many difficulties to implement its promised changes in terms of tax cuts, job stimulation and infrastructure spending. On the other hand, stocks continued to ascend, regardless of the progress. Looking ahead, however, we remain convinced that markets will experience more volatilities at some point when reality finally sets in.
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
- August 7, 2017: I Didn’t Learn Anything — Mistake vs. Temporary Underperformance
- July 31, 2017: Asset Classes And Fund Choices: A Primer
- July 24, 2017: Total Return Bond Fund Portfolios And Cash
- July 17, 2017: Long Term Stock Holding Periods For Retirement
- July 10, 2017: Half Year Asset Trend Review
- June 26, 2017: How To Beat The Best Balanced Allocation Fund
- June 19, 2017: Newsletter Collection Update
- June 12, 2017: A Mixed Bag Performance of Momentum Investing
- June 5, 2017: How To Start A New Portfolio
- May 29, 2017: Alternative Assets And Their Role In Portfolios
- May 22, 2017: Summer Seasonality And Portfolio Management
- May 15, 2017: Cash: Banking Or Investing?
- May 8, 2017: Holding Period of Long Term Timing Portfolios
- May 1, 2017: Debate on Risk vs. Volatility
- April 24, 2017: The Long Term Stock Market Timing Return Since 1871
- April 17, 2017: Risk vs. Volatility: Long Term Stock Market Returns
- April 10, 2017: Total Return Bond ETFs And Portfolios
- April 3, 2017: Quarter End Asset Trend Review
- March 27, 2017: Practical Consideration For IRAs And 401k Accounts
- March 20, 2017: Fund Fees: That’s (Still) Outrageous
- March 13, 2017: Long Term Stock Valuation Review
- March 6, 2017: Asset Classes for Retirement Investments
- February 27, 2017: Fidelity Total Bond Fund Review
- February 20, 2017: Long Term Stock Timing Based Portfolios And Their Roles
- February 13, 2017: Alternative Investment Portfolios Review
- February 6, 2017: Tax Free Municipal Bond Investments Review
- January 30, 2017: Brokerage Specific Conservative Portfolios
- January 23, 2017: Fixed Income Portfolio Review
- January 16, 2017: Long Term Trend Following Portfolio Review
- January 9, 2017: Tactical Asset Allocation Review
- January 3, 2017: Strategic Asset Allocation Review
- December 12, 2016: Enhanced Index Funds
- December 5, 2016: Review Of Broad Base Core Mutual Funds For Brokerages
- November 28, 2016: Core Index ETFs Review
- November 21, 2016: International Exposure Of U.S. Large Companies
- November 14, 2016: Asset Trends After The Election
- 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
Enjoy Newsletter
How can we improve this newsletter? Please take our survey
–Thanks to those who have already contributed — we appreciate it.