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Test Results
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- Is it important which funds you choose
for your portfolio?
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These Tests include:
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- Time periods that include different market conditions; a sideways market, a dramatically rising market, and a
dramatically falling market.
- 10 different plan configurations constructed from over 700
available funds.
- 8 portfolios constructed from funds in actual 401k plans. The
Fidelity and Schwab Brokerage Option portfolios were created with no
transaction fee funds available through Fidelity or Schwab.
- Calculations of Risk Adjusted Portfolios
compared to Buy & Hold Portfolios and the S&P 500 using the same funds
in each plan.
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Conclusions:
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- When BETTER performing funds are used in the portfolios, BETTER
returns are realized.
- Risk Adjusted Portfolios returned BETTER results than Buy & Hold
Portfolios constructed with the same funds.
- Our Risk Adjusted Portfolios shift assets away from market
segments that are out of favor and into market segments that are in
favor, which tends to REDUCE VOLATILITY AND RISK
- EACH Risk Adjusted Portfolio returned BETTER results than holding
the S&P 500 over this 5 year, with less risk than
holding the S&P 500.
- The returns of the individual Market Condition Portfolios used in the Risk Adjusted Portfolio are very similar to the
returns of the Buy & Hold Portfolios.
(Healthy Market Condition
Portfolios are very similar to Aggressive/Growth Portfolios. Moderate
Market Condition Portfolios are very similar to Growth/Moderate
Portfolios. Weak Market Condition Portfolios are very similar to
Moderate/Conservative Portfolios.)
The significance of this is -- if a Risk Adjusted Asset Allocation Model signal was
generated to move from a Healthy Market Condition Portfolio to a
Moderate Market Condition Portfolio, and an investor failed to move
immediately, he/she would simply continue to generate the returns that an
Aggressive/Growth Buy & Hold Portfolio would develop.
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Is it important which funds you choose
for your portfolio?
Answer: Yes!
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Better Performing Funds
produce
Better Results
The differences among these Buy & Hold Growth Portfolios are the funds available in each
plan. When BETTER performing funds are used in the portfolios, BETTER
returns are realized.
Additional Data
including
Available Funds,
Allocations and Results
for
Buy & Hold Portfolios and
Risk Adjusted Portfolios
can be seen by clicking on the specific plan.
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------------------------------------------ 5
Years -------------------------------------------
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Start |
1998 |
1999 |
2000 |
2001 |
2002 |
Buy & Hold
Growth Portfolio Values |
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Better Performing Funds |
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Schwab Brokerage Option |
10,000 |
12,281 |
18,976 |
18,617 |
18,021 |
14,905 |
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401k Plan 1 |
10,000 |
11,096 |
11,781 |
14,253 |
15,296 |
13,601 |
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Under Performing Funds |
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401k Plan 8 |
10,000 |
11,472 |
13,497 |
14,195 |
13,252 |
11,588 |
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401k Plan 5 |
10,000 |
11,621 |
13,872 |
13,139 |
12,444 |
10,537 |
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Compared to S&P 500 |
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Vanguard Index 500 |
10,000 |
12,862 |
15,571 |
14,161 |
12,459 |
9,700 |
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How well do the Risk Adjusted Portfolios
compare to Buy & Hold Portfolios?
Answer: Very Well!
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Fidelity Brokerage Option
These portfolios are constructed with some of the better
performing funds
from among the hundreds of No Transaction Fee funds
available through Fidelity.
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Start |
1998 |
1999 |
2000 |
2001 |
2002 |
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12/31/97 |
12/31/98 |
12/31/99 |
12/29/00 |
12/31/01 |
12/31/02 |
| Buy &
Hold Portfolios |
|
Aggressive Investor |
10,000 |
11,645 |
15,063 |
16,256 |
14,116 |
11,350 |
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Growth Investor |
10,000 |
11,487 |
14,382 |
15,561 |
13,934 |
11,726 |
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Moderate Investor |
10,000 |
11,278 |
13,480 |
14,635 |
13,679 |
12,218 |
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Conservative Investor |
10,000 |
11,070 |
12,578 |
13,708 |
13,423 |
12,710 |
| |
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Risk Adjusted Portfolio |
10,000 |
11,404 |
15,335 |
18,580 |
19,448 |
17,092 |
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Compared to S&P 500 |
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Vanguard Index 500 |
10,000 |
12,862 |
15,571 |
14,161 |
12,459 |
9,700 |
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Schwab Brokerage Option
These portfolios are constructed with some of the better
performing funds
from among the hundreds of No Transaction Fee funds
available through Schwab.
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Start |
1998 |
1999 |
2000 |
2001 |
2002 |
|
12/31/97 |
12/31/98 |
12/31/99 |
12/29/00 |
12/31/01 |
12/31/02 |
| Buy &
Hold Portfolios |
|
Aggressive Investor |
10,000 |
12,589 |
20,518 |
19,884 |
18,974 |
15,125 |
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Growth Investor |
10,000 |
12,281 |
18,976 |
18,617 |
18,021 |
14,905 |
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Moderate Investor |
10,000 |
11,874 |
16,926 |
16,926 |
16,739 |
14,602 |
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Conservative Investor |
10,000 |
11,467 |
14,875 |
15,236 |
15,457 |
14,300 |
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Risk Adjusted Portfolio |
10,000 |
12,227 |
19,408 |
22,345 |
25,470 |
21,499 |
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Compared to S&P 500 |
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Vanguard Index 500 |
10,000 |
12,862 |
15,571 |
14,161 |
12,459 |
9,700 |
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401k Plan 1
These funds are among the 10 funds available in this 401k plan.
These 10 funds have very strong performance rankings by Morningstar.
The Large Cap Growth fund in this portfolio, Jensen Fund, has
superior relative performance in a Weak market environment, but
under performs in a Healthy Market environment. The next plan,
401k Plan 2, shows
the effect of replacing the Jensen Fund with the Rydex OTC fund.
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Start |
1998 |
1999 |
2000 |
2001 |
2002 |
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12/31/97 |
12/31/98 |
12/31/99 |
12/29/00 |
12/31/01 |
12/31/02 |
| Buy &
Hold Portfolios |
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Aggressive Investor |
10,000 |
11,178 |
11,968 |
14,708 |
15,765 |
13,548 |
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Growth Investor |
10,000 |
11,096 |
11,781 |
14,253 |
15,296 |
13,601 |
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Moderate Investor |
10,000 |
10,989 |
11,536 |
13,648 |
14,666 |
13,654 |
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Conservative Investor |
10,000 |
10,881 |
11,290 |
13,043 |
14,036 |
13,707 |
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Risk Adjusted Portfolio |
10,000 |
10,397 |
11,142 |
13,284 |
14,941 |
13,533 |
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Compared to S&P 500 |
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Vanguard Index 500 |
10,000 |
12,862 |
15,571 |
14,161 |
12,459 |
9,700 |
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401k Plan 2
To test the effectiveness of
the Risk Adjusted Asset Allocation model, the Rydex OTC Fund
replaced the Jensen Fund. The other funds are the same.
The Rydex OTC fund in this study
had superior performance in a Healthy Market environment, and very
poor performance in the Moderate and Weak market environments during
this time period.
The Risk Adjusted Asset Allocation Model made good
use of this fund. Compare the results of this plan to the original
plan, 401k Plan 1.
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Start |
1998 |
1999 |
2000 |
2001 |
2002 |
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12/31/97 |
12/31/98 |
12/31/99 |
12/29/00 |
12/31/01 |
12/31/02 |
| Buy &
Hold Portfolios |
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Aggressive Investor |
10,000 |
13,498 |
19,880 |
17,121 |
15,501 |
11,920 |
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Growth Investor |
10,000 |
13,050 |
18,444 |
16,285 |
15,073 |
12,230 |
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Moderate Investor |
10,000 |
12,454 |
16,533 |
15,172 |
14,498 |
12,626 |
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Conservative Investor |
10,000 |
11,858 |
14,621 |
14,059 |
13,924 |
13,022 |
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Risk Adjusted Portfolio |
10,000 |
11,933 |
17,449 |
20,566 |
22,586 |
19,970 |
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Compared to S&P 500 |
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Vanguard Index 500 |
10,000 |
12,862 |
15,571 |
14,161 |
12,459 |
9,700 |
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401k Plan 3
These portfolios are constructed with some of the better
performing funds
from among the 84 funds available in this 401k
plan. |
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Start |
1998 |
1999 |
2000 |
2001 |
2002 |
|
12/31/97 |
12/31/98 |
12/31/99 |
12/29/00 |
12/31/01 |
12/31/02 |
| Buy &
Hold Portfolios |
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Aggressive Investor |
10,000 |
11,781 |
15,878 |
14,510 |
13,626 |
11,411 |
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Growth Investor |
10,000 |
11,604 |
15,060 |
14,034 |
13,376 |
11,641 |
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Moderate Investor |
10,000 |
11,370 |
13,977 |
13,418 |
13,078 |
11,983 |
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Conservative Investor |
10,000 |
11,136 |
12,895 |
12,802 |
12,780 |
12,326 |
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Risk Adjusted Portfolio |
10,000 |
11,249 |
15,259 |
17,113 |
18,424 |
16,803 |
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Compared to S&P 500 |
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Vanguard Index 500 |
10,000 |
12,862 |
15,571 |
14,161 |
12,459 |
9,700 |
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401k Plan 4
These portfolios are constructed with some of
the better performing funds
from among the 85 funds
available in this 401k plan.
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Start |
1998 |
1999 |
2000 |
2001 |
2002 |
|
12/31/97 |
12/31/98 |
12/31/99 |
12/29/00 |
12/31/01 |
12/31/02 |
| Buy &
Hold Portfolios |
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Aggressive Investor |
10,000 |
11,473 |
15,545 |
15,824 |
14,711 |
11,550 |
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Growth Investor |
10,000 |
11,368 |
14,781 |
15,205 |
14,431 |
11,985 |
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Moderate Investor |
10,000 |
11,222 |
13,770 |
14,377 |
14,046 |
12,526 |
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Conservative Investor |
10,000 |
11,076 |
12,759 |
13,549 |
13,662 |
13,067 |
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Risk Adjusted Portfolio |
10,000 |
11,351 |
15,327 |
18,549 |
20,136 |
18,613 |
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Compared to S&P 500 |
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Vanguard Index 500 |
10,000 |
12,862 |
15,571 |
14,161 |
12,459 |
9,700 |
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401k Plan 5
These portfolios are constructed with some retail funds and
funds that clone market indices.
Many of the 24 funds in this 401k plan are proprietary to Insurance company
that sponsors this 401k plan. Their proprietary funds cannot be tracked with
third party data.
To approximate the performance of these funds, we
have used funds that clone the market indices these proprietary
funds are supposed to track.
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Start |
1998 |
1999 |
2000 |
2001 |
2002 |
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12/31/97 |
12/31/98 |
12/31/99 |
12/29/00 |
12/31/01 |
12/31/02 |
| Buy &
Hold Portfolios |
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Aggressive Investor |
10,000 |
11,765 |
14,452 |
13,353 |
12,341 |
9,876 |
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Growth Investor |
10,000 |
11,621 |
13,872 |
13,139 |
12,444 |
10,537 |
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Moderate Investor |
10,000 |
11,420 |
13,104 |
12,847 |
12,567 |
11,392 |
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Conservative Investor |
10,000 |
11,220 |
12,335 |
12,554 |
12,690 |
12,248 |
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Risk Adjusted Portfolio |
10,000 |
11,570 |
14,376 |
14,724 |
15,225 |
13,210 |
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Compared to S&P 500 |
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Vanguard Index 500 |
10,000 |
12,862 |
15,571 |
14,161 |
12,459 |
9,700 |
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401K Plan 6
These portfolios are constructed with some of
the better performing funds
from among the 18 funds available in this 401k plan. |
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Start |
1998 |
1999 |
2000 |
2001 |
2002 |
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12/31/97 |
12/31/98 |
12/31/99 |
12/29/00 |
12/31/01 |
12/31/02 |
| Buy & Hold
Portfolios |
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Aggressive Investor |
10,000 |
11,798 |
15,505 |
15,299 |
13,797 |
11,135 |
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Growth Investor |
10,000 |
11,666 |
14,785 |
14,817 |
13,734 |
11,705 |
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Moderate Investor |
10,000 |
11,476 |
13,820 |
14,154 |
13,615 |
12,402 |
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Conservative Investor |
10,000 |
11,287 |
12,855 |
13,491 |
13,495 |
13,099 |
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Risk Adjusted Portfolio |
10,000 |
11,662 |
15,154 |
17,385 |
18,432 |
16,547 |
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Compared to S&P 500 |
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Vanguard Index 500 |
10,000 |
12,862 |
15,571 |
14,161 |
12,459 |
9,700 |
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401k Plan 7
These portfolios are constructed with some of
the better performing funds
from among the 10 funds available in this 401k
plan |
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Start |
1998 |
1999 |
2000 |
2001 |
2002 |
|
12/31/97 |
12/31/98 |
12/31/99 |
12/29/00 |
12/31/01 |
12/31/02 |
| Buy & Hold
Portfolios |
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Aggressive Investor |
10,000 |
11,743 |
14,678 |
14,954 |
13,585 |
11,032 |
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Growth Investor |
10,000 |
11,619 |
14,088 |
14,527 |
13,556 |
11,618 |
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Moderate Investor |
10,000 |
11,441 |
13,297 |
13,936 |
13,481 |
12,337 |
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Conservative Investor |
10,000 |
11,263 |
12,507 |
13,346 |
13,406 |
13,056 |
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Risk Adjusted Portfolio |
10,000 |
11,074 |
13,862 |
15,438 |
16,226 |
13,893 |
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Compared to S&P 500 |
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Vanguard Index 500 |
10,000 |
12,862 |
15,571 |
14,161 |
12,459 |
9,700 |
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401k Plan 8
These portfolios are constructed with some of
the better performing funds
from among the 10 funds available in this 401k
plan. |
|
Start |
1998 |
1999 |
2000 |
2001 |
2002 |
|
12/31/97 |
12/31/98 |
12/31/99 |
12/29/00 |
12/31/01 |
12/31/02 |
| Buy & Hold
Portfolios |
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Aggressive Investor |
10,000 |
11,567 |
13,975 |
14,560 |
13,224 |
10,996 |
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Growth Investor |
10,000 |
11,472 |
13,497 |
14,195 |
13,252 |
11,588 |
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Moderate Investor |
10,000 |
11,331 |
12,854 |
13,687 |
13,253 |
12,314 |
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Conservative Investor |
10,000 |
11,189 |
12,211 |
13,180 |
13,254 |
13,041 |
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Risk Adjusted Portfolio |
10,000 |
11,262 |
13,778 |
15,127 |
15,780 |
14,380 |
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Compared to S&P 500 |
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Vanguard Index 500 |
10,000 |
12,862 |
15,571 |
14,161 |
12,459 |
9,700 |
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- Each Risk Adjusted Portfolio used the same asset allocation
percentages. They differ from one another by the specific funds used
in each 401k plan.
- All the Risk Adjusted Portfolios include a 2% per year
management fee. None of the other portfolios include any
management fee. This is the management fee that would be used
for a Manage It For Me Investor. Even with this 2% annual management fee, the Risk
Adjusted Portfolios out performed the S&P 500 and the Buy & Hold
Portfolios.
These results have been calculated using
historical data, which we believe is accurate but we cannot guarantee. These portfolios have been prepared to compare the performance of
different types of asset allocation strategies but have not been traded
in actual accounts. Past performance does not guarantee future results.
NOTE!
We changed the parameters and slightly improved the performance of our
Risk Adjusted Asset Allocation model in the beginning of 2003.
These changed parameters and improved
2003 Model results are compared to
the 2002 Model results here.
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