With our
401k plan (administered by
Employee Fiduciary) up and running for 4 years now, I decided it was time to re-check overall assets to see if we are close to qualifying for lower cost class shares. And after looking up the numbers, our closest targets are:
- Vanguard Intermediate Treasuries Admiral Class - 92% of required minimum
- Vanguard Inflation Protected Securities Admiral Class - 86%
- Pimco Commodity Return Institutional Class - 45%
- Vanguard Small Cap Value ETF Class - 28%
The rest of the funds, we are at least a decade away from either ETF or Signal class shares.
While looking at the fund numbers though, my attention was drawn to how how much was invested in gold. Here is how our plan is split across funds:
Funds in asset order Amount
--------------------------------------- ------
American Century Global Gold 16.05%
Vanguard Intermediate Treasuries 14.25%
Vanguard Inflation Protected Securities 13.24%
Vanguard Small Cap Value 7.74%
Vanguard Prime Money Market 7.56%
Vanguard Index (Large) Value 7.14%
Pimco Commodity Real Return 6.94%
Vanguard REIT 5.74%
Vanguard European Stock 5.01%
Vanguard Pacific Stock 4.85%
Vanguard Emerging Markets 4.52%
Vanguard Index (Large) Growth 3.90%
Vanguard Small Cap Growth 3.05%
Perhaps people are just putting more money into gold? If we sort by total fund contribution dollars:
Funds in contribution order Contrib
--------------------------------------- ------
Vanguard Intermediate Treasuries 15.71%
Vanguard Inflation Protected Securities 14.03%
American Century Global Gold 12.35%
Vanguard Prime Money Market 8.74%
Pimco Commodity Real Return 7.89%
Vanguard Index (Large) Value 7.70%
Vanguard Small Cap Value 7.49%
Vanguard REIT 5.28%
Vanguard European Stock 5.20%
Vanguard Pacific Stock 5.05%
Vanguard Emerging Markets 4.17%
Vanguard Index (Large) Growth 3.71%
Vanguard Small Cap Growth 2.67%
12.35% of contributions have been directed into American Century Global Gold (BGEIX). Compared against the current 16.05% balance, it is likely that 3.7% difference has come from market returns. To test that out, we can compare current balance against contributions to calculate simple returns (not annualized):
Funds in simple return order Return
--------------------------------------- ------
American Century Global Gold 50.21%
Vanguard Small Cap Growth 31.87%
Vanguard REIT 25.70%
Vanguard Emerging Markets 25.26%
Vanguard Index (Large) Growth 21.50%
Vanguard Small Cap Value 19.46%
Vanguard European Stock 11.48%
Vanguard Pacific Stock 11.00%
Vanguard Inflation Protected Securities 9.07%
Vanguard Index (Large) Value 7.24%
Vanguard Intermediate Treasuries 4.85%
Pimco Commodity Real Return 1.71%
Vanguard Prime Money Market 0.01%
--------------------------------------- ------
Overall Return 15.60%
BGEIX by far has given the most returns for our 401K participants. (Nice 3 year return of 0.01% for Prime Money Market, huh?)
Let's compare against actual fund performance during 2009 and 2010.
2009 2010 Total
------- ------- -------
Vanguard Emerging Markets +75.98% +10.58% +94.60%
American Century Global Gold +43.26% +27.54% +82.71%
Vanguard Small Cap Growth +41.85% +11.59% +58.29%
Vanguard REIT +29.58% +19.44% +54.77%
Pimco Commodity Real Return +39.34% +6.99% +49.08%
Vanguard Small Cap Value +30.34% +9.54% +42.77%
Vanguard Index (Large) Growth +36.29% +4.41% +42.30%
Vanguard European Stock +31.91% +0.00% +31.91%
Vanguard Pacific Stock +21.18% +4.96% +27.19%
Vanguard Intermediate Treasuries +13.32% +10.47% +25.18%
Vanguard Index (Large) Value +19.58% +3.74% +24.05%
Vanguard Inflation Protected Securities +10.80% +6.96% +18.51%
Vanguard Prime Money Market +0.53% +0.07% +0.60%
The fund return order roughly match up with overall 401K returns except for the case of Vanguard Emerging Markets (VEIEX)
and Pimco Commodity Return (PCRDX). It appears the majority of participants were pretty good at sticking with their
original portfolio decisions but financial news (financial porn) scared a few into moving money
out of the developing world and commodities.
Now I cannot predict what will happen in the future. If Ben Bernanke continually does more rounds of Quantitative Easing
(printing money), the value of gold will react inversely to the dropping value of the U.S. Dollar -- in other words up.
But we've also seen gold go from the inflation-adjusted heights in the late 70's to near rock bottom early this decade. Hence a middle-of-the-road option is to use automatic 401K rebalancing
feature to sell a bit of BGEIX (or any fund) when it goes up and buy a bit when it goes down.
To determine how many participants were using rebalancing, I counted the number of transfer transactions. While I cannot see individual data, the odds are low that a small company like ours would have 2 employees pick the same dates for rebalancing. Hence the distinct count says only 35% of our plan participants is using automatic rebalancing even though rebalancing was an emphasized part of my 401K presentation. This tells me there's a general inertia against making changes to investment strategies -- even if it only takes 15 seconds to click on a few buttons on a website -- and the first decisions usually end up being the only decisions. The best I can do is to write up detailed instructions on how to enable rebalancing and hope people those who want to use this strategy get a bit of motivation to do it.
(Filed in investing, retirement plans)
401K plan checkup
Posted by Mossy
November 6, 2010 2:54 AM
- Vanguard Intermediate Treasuries Admiral Class - 92% of required minimum
- Vanguard Inflation Protected Securities Admiral Class - 86%
- Pimco Commodity Return Institutional Class - 45%
- Vanguard Small Cap Value ETF Class - 28%
The rest of the funds, we are at least a decade away from either ETF or Signal class shares.While looking at the fund numbers though, my attention was drawn to how how much was invested in gold. Here is how our plan is split across funds:
Perhaps people are just putting more money into gold? If we sort by total fund contribution dollars:
12.35% of contributions have been directed into American Century Global Gold (BGEIX). Compared against the current 16.05% balance, it is likely that 3.7% difference has come from market returns. To test that out, we can compare current balance against contributions to calculate simple returns (not annualized):
BGEIX by far has given the most returns for our 401K participants. (Nice 3 year return of 0.01% for Prime Money Market, huh?) Let's compare against actual fund performance during 2009 and 2010.
2009 2010 Total ------- ------- ------- Vanguard Emerging Markets +75.98% +10.58% +94.60% American Century Global Gold +43.26% +27.54% +82.71% Vanguard Small Cap Growth +41.85% +11.59% +58.29% Vanguard REIT +29.58% +19.44% +54.77% Pimco Commodity Real Return +39.34% +6.99% +49.08% Vanguard Small Cap Value +30.34% +9.54% +42.77% Vanguard Index (Large) Growth +36.29% +4.41% +42.30% Vanguard European Stock +31.91% +0.00% +31.91% Vanguard Pacific Stock +21.18% +4.96% +27.19% Vanguard Intermediate Treasuries +13.32% +10.47% +25.18% Vanguard Index (Large) Value +19.58% +3.74% +24.05% Vanguard Inflation Protected Securities +10.80% +6.96% +18.51% Vanguard Prime Money Market +0.53% +0.07% +0.60%The fund return order roughly match up with overall 401K returns except for the case of Vanguard Emerging Markets (VEIEX) and Pimco Commodity Return (PCRDX). It appears the majority of participants were pretty good at sticking with their original portfolio decisions but financial news (financial porn) scared a few into moving money out of the developing world and commodities.Now I cannot predict what will happen in the future. If Ben Bernanke continually does more rounds of Quantitative Easing (printing money), the value of gold will react inversely to the dropping value of the U.S. Dollar -- in other words up. But we've also seen gold go from the inflation-adjusted heights in the late 70's to near rock bottom early this decade. Hence a middle-of-the-road option is to use automatic 401K rebalancing feature to sell a bit of BGEIX (or any fund) when it goes up and buy a bit when it goes down.
To determine how many participants were using rebalancing, I counted the number of transfer transactions. While I cannot see individual data, the odds are low that a small company like ours would have 2 employees pick the same dates for rebalancing. Hence the distinct count says only 35% of our plan participants is using automatic rebalancing even though rebalancing was an emphasized part of my 401K presentation. This tells me there's a general inertia against making changes to investment strategies -- even if it only takes 15 seconds to click on a few buttons on a website -- and the first decisions usually end up being the only decisions. The best I can do is to write up detailed instructions on how to enable rebalancing and hope people those who want to use this strategy get a bit of motivation to do it.
(Filed in investing, retirement plans)
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