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.
Review of Broad Base Core Mutual Funds for Brokerages
In the previous newsletter, we reviewed core index ETFs for brokerage plans. In this newsletter, we review core index mutual funds used for brokerage plans. Last year we review them in November 9, 2015: Broad Base Core Mutual Fund Review.
We wrote last year that for many brokerages, there were not many transaction fee free low cost index mutual funds, especially those from Vanguard. Unfortunately, this situation hasn’t improved. For the brokerage plans that use mutual funds, we again have to rely on some low cost transaction fee free broad base mutual funds. Notice these funds are very brokerage specific. For these mutual funds, some brokerages might charge transaction fees and some might not. As a reminder, our brokerage specific plans only use transaction fee free funds. Furthermore, the fees these mutual funds charge have not improved much to match those ultra low cost index mutual funds.
US Equity
As we reviewed in the last year’s newsletter, many S&P 500 index mutual funds available to brokerages are comparable, though some might charge much more than others. Please refer to last year’s newsletter for these funds.
We want to look at how PSPDX (PIMCO StocksPLUS D) (used in Fidelity, Schwab, Merrill, Etrade investment plans) has performed, compared with the low cost VFINX (Vanguard 500 Index Investor). The PIMCO fund is an enhanced index fund that uses derivatives to track S&P 500 and invests the bulk of money in a fixed income bond portfolio, hopefully to deliver better total returns than S&P 500.
Fund Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR | 10Yr Sharpe |
---|---|---|---|---|---|---|
PSPDX (PIMCO StocksPLUS D) | 9.7% | 8.1% | 8.3% | 15.0% | 6.9% | 0.29 |
VFINX (Vanguard 500 Index Investor) | 9.7% | 6.8% | 8.9% | 15.3% | 6.9% | 0.3 |
See detailed performance comparison >>
Year to date (YTD), the two funds exactly match to each other. Similarly they have the same 10 year returns. Again, we are cautious about the PIMCO fund in the current rising rate environment as its fixed income portfolio might encounter difficulty.
Moving on to total stock market index tracking funds:
Fund Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR | 10Yr Sharpe |
---|---|---|---|---|---|---|
FSTMX (Fidelity Spartan Total Market Index Inv) | 10.5% | 8.2% | 8.6% | 14.3% | 7.0% | 0.3 |
SWTSX (Schwab Total Stock Market Index) | 10.5% | 8.2% | 8.6% | 14.3% | 7.1% | 0.31 |
NOSIX (Northern Stock Index) | 9.7% | 7.9% | 9.0% | 14.3% | 6.7% | 0.29 |
POMIX (T. Rowe Price Total Equity Market Idx) | 10.6% | 8.2% | 8.5% | 14.3% | 6.9% | 0.3 |
VTSMX (Vanguard Total Stock Mkt Idx Inv) | 10.4% | 8.2% | 8.5% | 14.2% | 7.0% | 0.3 |
See detailed performance comparison >>
The most noticeable laggard here is NOSIX (Northern Stock Index) that is used in Merrill Edge. This is not surprising as this fund charges the highest expense (about 0.2% more than other funds). Other than this, other funds have comparable performance.
International Developed Market Stock Mutual Funds
We are again seeing a wide performance dispersion among these mutual funds.
Fund Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR | 10Yr Sharpe |
---|---|---|---|---|---|---|
SWISX (Schwab International Index) | -1.5% | -3.4% | -2.2% | 5.3% | 0.9% | 0.02 |
PPUDX (PIMCO Intl StkPLUS TR Strat (Unhedged) D) | -0.7% | -2.2% | -3.0% | 6.6% | 2.6% | 0.08 |
PIPDX (PIMCO International StocksPLUS TR Str D) | 3.2% | 0.2% | 3.6% | 11.3% | 5.2% | 0.2 |
FSIIX (Fidelity Spartan International Index Inv) | -1.6% | -3.5% | -2.1% | 5.5% | 0.8% | 0.02 |
PIEQX (T. Rowe Price International Eq Index) | -0.9% | -3.0% | -2.1% | 5.2% | 0.9% | 0.02 |
VGTSX (Vanguard Total Intl Stock Index Inv) | 2.6% | 0.4% | -1.7% | 4.5% | 1.0% | 0.02 |
VDSIX (Victory Diversified Stock I) | 2.9% | -1.0% | 4.2% | 12.0% |
See detailed performance comparison >>
The two PIMCO funds stand out in this pack. Even for PPUDX (PIMCO Intl StkPLUS TR Strat (Unhedged) D) which does not hedge currency exchange, it has done better than others. Furthermore, the currency hedged PIPDX (PIMCO International StocksPLUS TR Str D) has done way better. As we noted before, the currency hedged international funds are becoming more and more important as we are seeing some wide currency fluctuation, given the Trump election victory and current global financial relationship.
Among others, VGTSX (Vanguard Total Intl Stock Index Inv) fund and Schwab’s fund are still our favorite.
Emerging Market Stock Mutual Funds
Fund Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR | 10Yr Sharpe |
---|---|---|---|---|---|---|
FPEMX (Fidelity Spartan EMkts Idx Inv) | 11.3% | 8.1% | -2.5% | 0.3% | ||
ODMAX (Oppenheimer Developing Markets A) | 7.2% | 4.9% | -3.9% | 2.1% | 4.9% | 0.19 |
NOEMX (Northern Emerging Markets Equity Index) | 10.9% | 7.8% | -3.4% | 0.2% | 1.5% | 0.04 |
VEIEX (Vanguard Emerging Mkts Stock Idx) | 11.7% | 8.9% | -2.1% | 0.6% | 2.1% | 0.06 |
PRMSX (T. Rowe Price Emerging Markets Stock) | 11.3% | 7.8% | -0.5% | 1.8% | 2.0% | 0.06 |
SSEMX (SSgA Emerging Markets Instl) | -0.1% | -3.1% | -7.4% | -2.7% | -0.4% | -0.04 |
See detailed performance comparison >>
We make the following observations:
- SSEMX (SSgA Emerging Markets Instl) is a big disappointment: its performance has been way off. We are putting this fund under review and possibly will remove it from our plans.
- Actively managed ODMAX (Oppenheimer Developing Markets A) has not been lucky this year: it underperformed other index funds. However, we believe it’s still too early to make any conclusion on this fund as it has an outstanding long term performance.
- NOEMX (Northern Emerging Markets Equity Index) underperformed, mostly due to its higher cost.
Real Estate Mutual Funds
Fund Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR | 10Yr Sharpe |
---|---|---|---|---|---|---|
PETDX (PIMCO Real Estate Real Return D) | 3.5% | 5.3% | 13.5% | 11.6% | 6.7% | 0.16 |
FRXIX (Fidelity Spartan Real Estate Idx Inv) | 1.6% | 3.8% | 11.9% | 11.3% | ||
CSRSX (Cohen & Steers Realty Shares) | 1.5% | 3.2% | 11.8% | 11.5% | 4.5% | 0.11 |
VGSIX (Vanguard REIT Index Inv) | 3.5% | 5.4% | 11.8% | 11.9% | 4.5% | 0.11 |
TCREX (TIAA-CREF Real Estate Sec Retail) | 0.3% | 2.1% | 10.5% | 10.8% | 3.5% | 0.08 |
See detailed performance comparison >>
We notice that the PIMCO fund and the Vanguard index fund have done the best for the past one year. The PIMCO fund is still outstanding for its long term performance. However, as we noted before, we are cautious about this fund in the rising rate environment as this fund, like other PIMCO’s enhanced index funds, invests in a fixed income portfolio while using derivatives to track an underlying index.
Market Overview
It looks like the Trump election victory induced market rally has stalled. Last week, US stocks had a small loss. Bonds continued their losing streak, though they somewhat stabilized. As we pointed out right after the election, we believe investors are too quick to speculate that the new administration will deliver its promise and grow the economy in a faster pace. Regardless whether the promise will be materialized or not, the obstacles will be ahead. Furthermore, US stocks are at a historically high valuation level. Markets will for sure have a bumpy ride ahead. Again, we emphasize to stick to your strategy and have a long term vision.
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 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
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