Microsoft Corporation develops, manufactures, licenses, and supports a range of software products and services for various computing devices worldwide. The company is famous for its Windows operation systems and Office suite of tools for PC computers. It was cofounded by Bill Gates and Paul Allen in 1975 and is headquartered in Redmond, Washington.
Microsoft Corporation Savings Plus 401K Plan consists of 23 funds. These funds enable participants to gain exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income.
|MID-CAP VALUE||ARTQX||Artisan Mid Cap Value|
|ROOT||STLBX||Barclays Global Investors LP 2010 I|
|Target Date 2016-2020||STLCX||Barclays Global Investors LP 2020 I|
|Target Date 2026-2030||STLDX||Barclays Global Investors LP 2030 I|
|Target Date 2036-2040||STLEX||Barclays Global Investors LP 2040 I|
|Target Date 2050+||STLFX||Barclays Global Investors LP 2050 I|
|Retirement Income||STLAX||Barclays Global Investors LP Retire I|
|LARGE GROWTH||FCNKX||Fidelity Contrafund K|
|LARGE GROWTH||FGCKX||Fidelity Growth Company K|
|US EQUITY||MSFT||Microsoft Corporation|
|Moderate Allocation||OAKBX||Oakmark Equity & Income I|
|Intermediate-Term Bond||PTTRX||PIMCO Total Return Instl|
|SMALL BLEND||RLPRX||Royce Low-Priced Stock R|
|Foreign Large Blend||VWIGX||Vanguard International Growth|
|Foreign Large Value||VTRIX||Vanguard International Value|
|LARGE GROWTH||VIGRX||Vanguard Growth Index|
|LARGE BLEND||VIIIX||Vanguard Institutional Index Instl Pl|
|Short-Term Bond||VBISX||Vanguard Short-Term Bond Index|
|Small Growth||VISGX||Vanguard Small Cap Growth Index|
|MID-CAP VALUE||IWS||iShares Russell Midcap Value Index|
|LARGE VALUE||VIVIX||Vanguard Value Index Instl|
The list of minor asset classes covered:
Foreign Large Blend
Foreign Large Value
Target Date 2016-2020
Target Date 2026-2030
Target Date 2036-2040
Target Date 2050+:
|Asset Class||Number of funds|
|Emerging Market Equity||0|
As of Dec 19, 2011, this plan investment choice is rated as above average based on MyPlanIQ Plan Rating methodology that was designed to measure how effective a plan’s available investment funds are . It has the following detailed ratings:
Diversification — Rated as average (50%)
Fund Quality — Rated as above average (80%)
Portfolio Building — Rated as above average (67%)
Overall Rating: above average (66%)
One can see that the funds in Microsoft plan have high ratings in terms of quality (80%). Fidelity Contra fund and Artisan Mid Cap Value are good funds to have currently.
In this market it is even more critical to properly diversify and respond market changes. Strategic and tactical asset allocation strategies (SAA and TAA ) can be used for participants in Microsoft Corporation Savings Plus 401K Plan.
Strategic Asset Allocation is based on well known modern portfolio theory and its key features include: diversification, proper fund selection and periodically re-balancing.
Tactical Asset Allocation works on a diversified array of assets provided by funds in a plan and adjusts asset mixes based on market conditions such as asset price momentum utilized by TAA.
The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies. For comparison purpose, we also include the moderate model portfolios of a typical 3 asset SIB (Simpler Is Better) plan . This SIB plan has the following candidate index funds and their ETFs equivalent:
US Equity: SPY or VTI
Foreign Equity: EFA or VEU
Fixed Income: AGG or BND
Performance chart (as of Dec 19, 2011)
Performance table (as of Dec 19, 2011)
|1Yr AR||1Yr Sharpe||3Yr AR||3Yr Sharpe||5Yr AR||5Yr Sharpe|
|Microsoft Corporation Savings Plus 401K Plan Tactical Asset Allocation Moderate||-1%||1%||14%||9%||94%||7%||68%|
|Microsoft Corporation Savings Plus 401K Plan Strategic Asset Allocation Moderate||-6%||-4%||-31%||9%||68%||2%||7%|
|Three Core Asset ETF Benchmark Tactical Asset Allocation Moderate||4%||5%||83%||4%||42%||4%||34%|
|Three Core Asset ETF Benchmark Strategic Asset Allocation Moderate||-4%||-3%||-3%||11%||67%||1%||4%|
The outstanding fund quality does help to boost the plan’s long term (5 year) portfolio returns. Even though the plan lacks of other major asset offerings such as emerging market stocks and real estate investment trusts (REITs), the simple three core plan is just right for this year’s investment environment.
This plan beats the three asset benchmark by virtue of the US asset class choices. If would be a stronger plan with more fixed income choices and an additional asset class.
To summarize, Microsoft Corporation Savings Plus 401K Plan participants can achieve the best investment returns by adopting asset allocation strategies that are tailored to their risk profiles.
MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.