Target Date Indices

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Business Wire - Press Release
Zacks Launches Lifecycle Indices
10.01.07, 12:25 PM ET

Zacks Investment Research, Inc. is pleased to announce the launch of industry's first lifecycle index series. In a lifecycle program, investors simply select the fund whose target date best matches the year they plan to access their money and the rest is on autopilot. At inception, lifecycle balances have a relatively aggressive equities tilt. Then, as the pre-set target date approaches, assets gradually move along a risk "glidepath" towards more conservative fixed income positions. At all points along the glidepath, assets are prudently diversified by sector, capitalization, duration, and country.

The following are the Zacks target date indices: -0- *T Zacks 2040 Lifecycle Index Zacks 2030 Lifecycle Index Zacks 2020 Lifecycle Index Zacks 2010 Lifecycle Index Zacks At Target Lifecycle Index *T

Lifecycle funds have grown in popularity among retirement plan participants, goal-based planners, and more recently, federal regulators, because they remove investor emotions from key reallocation and asset selection decisions. While Zacks agrees that such control of human behavior improves investment outcomes, the firm notes that: -0- *T 1) Most managers assume their lifecycle funds will be used only for retirement planning. Since these glidepaths target actuarial life expectancies, they carry very high levels of risk as stated maturity dates approach. 2) In 401(k) and other qualified retirement plan markets, there is growing demand for lifecycle vehicles that are free of conflicts of interest. *T

Retirement and More: According to Michael Case Smith of the Zacks Index and Allocation Group, "The industry average allocation to equities in 2010 funds is 52%. That may be the right answer for a Monte Carlo simulation but the wrong one for investors with three years to go before they fund a retirement annuity, a vacation home, education, a wedding, or long-term medical care." As target dates near, people care more about return of capital than return on capital, regardless of what computer models say." To solve the problem, Zacks applies proprietary risk utility methodologies to traditional computer simulations for allocations that "work" for the majority of investors at each segment of the reallocation glidepath.

Conflict Free Investing: The Zacks indices are unique because they will be the basis of the industry's first securities-based lifecycle program. With no conflicts of interest or fee layering from sub-sector ETFs or proprietary mutual funds, this securities-based lifecycle program is well suited for 401(k) investing. A securities-based lifecycle program reduces plan sponsor exposure to lawsuits because it complies with the new Pension Protection Act regulations at the highest levels.

Potential index constituents include U.S. equities, international equities, and domestic bonds. The index constituent selection methodology utilizes proprietary selection rules to identify stocks and bonds with risk/return profiles consistent with general market benchmarks. The indexes are adjusted quarterly, or as required, to assure timely constituent selections. The Zacks Lifecycle Indices are published by the New York Stock Exchange, under the ticker symbols TDAXTN, TDAXTW, TDAXTH, TDAXFO, TDAXIT.

About Zacks

The Zacks Lifecycle Indices(TM) complement the firm's alpha-generating quantitative indices used in yield, growth & income, sector rotation, international, style box and market-cap specific products.

Founded in 1978, Zacks Investment Research has more than 25 years of experience in providing institutional and individual investors with the analytical tools and financial information necessary to the success of their investment process. Zacks created the first earnings estimate revision model and originated the concept of the Earnings Surprise. Today, Zacks' models process over 25,000 earnings estimate revisions and changes in broker recommendations weekly from over 200 brokerage firms, produced by more than 3,500 analysts. As one of the top market data and proprietary investment model providers, Zacks clients include some of the most widely known institutions in the financial industry.

Herramienta interesante de Fidelity

My Plan

¿Busca una renta mensual?

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Fidelity recently introduced a new kind of mutual fund called an income replacement fund. This kind of fund is managed with the goal in mind of maximizing income by balancing growth investing, income investing, and a return of principal.

They give an example in this video of a woman who wants to invest $100,000 for 20 years. Her average monthly income from her $100,000 investment is $540. Here’s a look at her projected monthly income based on the year:


It’s important to note that these monthly income payments ARE NOT guaranteed. That said, the funds are designed based on the time horizon. In other words, as time progresses, the funds become more conservative. These funds carry an expense ratio around .61%, which isn’t too bad especially when you consider the expenses on most annuities that are designed to do essentially the same thing but with some guarantees.

I think this is an interesting concept that is only going to get more popular. In fact, I read last week in the Wall Street Journal that Vanguard is planning their own versions of income replacement funds called “Managed Payout Funds.” From the article:

Vanguard filed with the Securities and Exchange Commission last week to launch Managed Payout Real Growth, Managed Payout Moderate Growth and Managed Payout Capital Preservation.

Vanguard’s expense ratio on these funds is expected to be around .34% or roughly half of what Fidelity charges.

This is only the beginning…

Dollar-cost averaging

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In turbulent times, resist the urge to mess with your retirement plan and you'll come out ahead.

With dreary news coming out of the banking and real estate scenes almost daily, and the dreaded "r" word (as in recession) getting tossed around, roller-coaster madness is the new normal in the stock market.

It's a scary situation. But it doesn't have to wreck your retirement.

The single most important thing you can do in a turbulent market is stick to your retirement game plan - that means contributing regularly and definitely not panicking and selling.

In fact, if you had stayed the course when the stock market was tanking in July and August, you actually would have made a far better return on your money than if the stock market had stayed flat - or even increased modestly.

The reason comes down to dollar-cost averaging. Let's say, for example, that you contribute $500 from your paycheck every two weeks to your retirement plan. Of that amount, let's further assume that you are allocating 80%, or $400, to a low-cost stock fund, such as Vanguard's S&P 500 index fund.

Looking back at the third quarter, you would have made seven contributions (assuming you get paid every other Thursday). Each $400 allocation to the index fund would have purchased a different number of shares. (see table)

On July 19, for instance, when the fund was trading at $143 per share, you would have bought 2.8 shares. On Aug. 16, when the price had tanked to $130, you would have picked up 3.1 shares. All told, by the end of the quarter you would have purchased 20.46 shares for a total cost of $2,800.

How did the market overall do during that time? By the end of September, it had just barely recovered from the 10% plunge it took in July and August, when the credit crisis was in full swing. As a result, the Vanguard S&P 500 index fund managed to eke out a gain of just 0.8% for the third quarter.

But you would have done much, much better. On Sept. 27, the 20.46 shares you purchased were worth $141 each, for a total of $2,885. That translates into a 3% gain on your retirement plan contributions for the third quarter - a return that most professional money managers would have killed for.

And you would have gotten it because you had the courage to keep buying as the market fell.


By the way, you would have gotten the same type of great returns if you had been buying stocks right after the Crash of 1987 - or after any other big drop. As long as your investing timeframe is long enough to allow the market to climb back from a potentially severe plunge - about 7-10 years - then you will usually be far better off contributing to your retirement plan.

That's not to suggest that dollar-cost averaging alone is a panacea for anything that might ail your retirement plan. If we get another prolonged bear market and you don't have a lot of time on your side (if you're planning to retire in 5 years' time, for instance), your stock investments are going to take a hit no matter what.

So to be truly shock-resistant, your retirement plan must hold a diversified mix of stocks and bonds. And you have to rebalance every year. I'll get into those issues in future columns.

In the meantime, just remember that if you have a decent time horizon and you're diversified, your best bet in a volatile market is to simply let your retirement plan do its thing. Resist the urge to mess with it. You won't regret it.

Questions or comments about retirement? Send e-mails to jrevell@moneymail.com.
Copyrighted, CNNMoney. All Rights Reserved.

Retiro

New ETFs Target Retirement Market
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Sponsored by
by John Spence
Monday, October 22, 2007provided byMarketWatch

First 'lifecycle' ETFs aimed at long-term investors in retirement plans.

The first target-date exchange-traded funds might just lift the velvet rope that has kept ETFs from the biggest party of all: retirement plans.

ETFs listed on U.S. exchanges have grown to more than $500 billion in assets, but they've been unable to make significant inroads into the retirement-plan market, long seen as a cash cow for traditional mutual funds.

At the end of 2006, retirement plans
assets grew to about $2.7 trillion, according to Investment Company Institute, the main trade group for the mutual fund industry. About 50 million American workers participated in retirement plans
at year-end.

Mutual funds have enjoyed a tremendous boost from the rise of the retirement plans because, along with other products such as annuities, they account for most retirement investment options.

ETFs, meanwhile, face several barriers to entry. ETFs are structured as baskets of securities that trade like individual stocks, and broker commissions are required to buy and sell shares. Many wonder if the ability to trade frequently is relevant for long-term investors in retirement plans.

Some firms are working on platforms that would aggregate ETF trades to reduce trading fees. However, the administration and record-keeping of retirement plans is geared to mutual funds.

Tracking the life cycle

In a bid to crack the retirement plans nut, TD Ameritrade Holding Corp. (AMTD) subsidiary Amerivest Investment Management LLC and XShares Advisors have partnered to create a family of the first "lifecycle" ETFs.

Also known as target-date funds, these offerings have been extremely popular choices in retirement plans when offered as mutual funds. The investment products are designed to provide investors with diversified exposure to bonds, U.S. stocks, foreign companies and other asset classes.

Target-date funds are classified by the year in which the worker plans to retire or reach some other major financial goal. These products are designed to automatically scale back risk as the investor gets closer to the target date, typically by selling stocks and buying income-producing bonds.

So-called balanced funds, which include lifecyle offerings and invest in both stocks and bonds, are increasingly popular with younger workers in retirement plans.

"More recently hired participants hold balanced funds and are more likely to hold a high concentration of their accounts in balanced funds," wrote the ICI in its latest review of the retirement plans market.

"In addition, at year-end 2006, 24% of the account balances of recently hired participants in their twenties is invested in balanced funds, compared with 19% in 2005, and about 7% among that age group in 1998," the group said. "A similar pattern occurs across all age groups."

Apart from target-date funds, the ETF business has been trying to break into the retirement-plan market for years. There are already "funds of funds" and separate accounts that use ETFs for the underlying investments.

Additionally, BenefitStreet Inc. and money manager Barclays Global Investors earlier this year struck a deal to distribute ETFs to corporate sponsors.

BenefitStreet, which handles record-keeping and many client-support functions, last month launched a new retirement plans platform enabling investors to choose both ETFs and mutual funds in the same plan.

WisdomTree Investments Inc. (WSDT) recently unveiled a retirement plans platform designed for retirement plans, while Invest n Retire LLC in Portland, Ore., is a back-office specialists offering ETFs directly to employers.

Long-term horizon

TD Ameritrade and XShares have launched five new target-date ETFs: TDAX Independence 2010 ETF (TDD), TDAX Independence 2020 ETF (TDH), TDAX Independence 2030 ETF (TDN) and TDAX Independence 2040 ETF (TDV) and TDAX In-Target ETF (TDX).

The lifecycle funds get progressively more aggressive the further out the target date. For example, TDAX Independence 2010 ETF has an initial allocation to 8% in international stocks, 25% in U.S. stocks and 67% in fixed-income, although the allocations change over time.

However, the TDAX Independence 2040 ETF has an initial 24% stake in international, 73% in domestic stocks and 3% in bonds. The TDAX In-Target ETF is the most conservative, with 89% earmarked for fixed-income.

Bill Vulpis, president of Amerivest, said the new TDAX Independence ETFs are unique because they're not structured as funds of funds like most target-date offerings. Rather, they invest in proprietary indexes designed by Zacks Investment Research. He touted the low costs, transparency and flexibility of ETFs as a natural fit. The target-date ETFs have expense ratios of 0.65%, compared with about 1.3% for the average comparable mutual fund, Vulpis said.

Each of the new TDAX Independence ETFs tracks a Zacks index holding 500 securities -- 300 U.S. stocks, 100 international developed-markets equities and 100 debt securities.

"We wanted to provide a product that was simple yet diversified, with modest fees," Vulpis said. "We want to help investors with automatic asset allocation and rebalancing, and an ETF was the best way to go about that."

Michael Case Smith, managing director at Zacks IFE, added that the indexes result in lifecycle ETFs that are more aggressive in the "out" years when the target date is distant, by allocating relatively more to stocks than bonds, relative to comparable funds. Meanwhile, the Zacks indexes get relatively more conservative when they get close to the target date, Smith said.

The indexes are more aggressive in the "out" years because people have many more working years ahead, he explained. The benchmarks are more conservative closer to the target date because investors then are concerned with preserving capital, he added.

Pension reform alters landscape

Assets in target-date funds are expected to grow with the passage of the Pension Protection Act. Although the Labor Department is still finalizing its rules, many companies have been automatically enrolling employees in retirement plans. More importantly, target-date funds are seen as logical "default" options if the workers don't choose their investments.

Congress is also considering mandating greater fee disclosure in retirement plans, and the Labor Department is working on improving disclosure between plans and workers.

Tony Dudzinski, chief executive at XShares Advisors, said the indexed ETF structure offers advantages in that regard. He said managers may face conflicts of interest because most target-date funds own in-house funds that may be expensive or have poor performance. The fund of funds structure also layers on extra management fees on top of the expenses for the underlying funds, he said.

Also, ETFs can bring more transparency to the target-date fund market because the holdings are disclosed daily, Dudzinski said.

"Based on what the Labor Department is doing, we see big changes for the retirement plans and defined-contribution markets," the executive said, adding he expects more disclosure on fees that mutual funds pay to retirement plans.

XShares' move into diversified target-date funds is somewhat surprising because the firm is best known for its ETFs that break the health-care industry into narrow slices.

Dudzinski said the company is building multiple business lines and a wider spectrum of products. Last month, XShares listed a family of specialized real estate ETFs with Adelante Shares LLC.

John Spence is a reporter for MarketWatch in Boston.
Copyrighted, MarketWatch. All rights reserved. Republication or redistribution of MarketWatch content is expressly prohibited without the prior written consent of MarketWatch. MarketWatch shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Fondos Mutuos

Entre los fondos disponibles para invertir en US Pension Trust encontramos los siguientes: FDGRX, FDFFX, FECAX, JANSX, FDGFX, FSLCX, FMAGX, FLPSX, FGRIX, VWUSX, FFFDX, FFFEX. Considero que tener acceso a esto fondos mediante inversiones regulares es interesante, pues nos permite a nosotros los Latinoamericanos, diversificar nuestras inversiones que financiarán nuestra jubilación.

US Pension Trust

Recien llego a mis manos este producto de pensiones. Por lo que he podido ver es un producto interesante con buenos costos y fondos con muy buenos retornos. Para más información pueden consultar la página web.

Factor 14.09

¿Cuanto dinero debo de tener ahorrado para generar US$50,000.00 al año de renta durante 25 años, considerando una tasa de interés del 5% anual? Una manera sencilla para calcular esto es multiplicando la renta deseada por el factor 14.09. Este tip le puede ayudar para tener una idea del capital que debe usted de disponer para financierse su jubilación.

El costo de esperar (Procrastination)

¿Cuenta usted con un plan de retiro? Posponer esta desición tiene costos. Le adjunto esta tabla donde pueden apreciar cuanto sería necesario ahorrar demás, por cada año que posponga la desición de contratar su fondo de jubilación.



Si lo vemos de otra forma, esta tabla lo muestra en terminos de tasa de interés.



¿Que esta esperando? Empiece lo antes posible.

Fondo de Jubilación

Dicen que nada nos tomará tan de sorpresa como el momento en que debemos de jubilarnos. Jubilarse es cómo irse de vacaciones por 1000 semanas. ¿Cual es el costo de una semana de vacaciones? Es alto, por lo que el costo de postergar la decisión de contratar un plan de jubilaciónes, es un lujo que no podemos darnos. El capital se duplica cada 10 años a una tasa de interés del 7%. ¿Donde podemos obtener una tasa de interés del 7%? Considero que para obtener esa tasa de retorno, sin la necesidad de asumir riesgos innecesarios, hay que invertir en los mercados internacionales de capitales y de deuda. Uno de los programas de jubilación que promovemos son los de la Aseguradora Fortuna, subsidiaria del grupo Generali basada en Liechtenstein. En este folder se puede descargar información sobre los productos.

Technorati tags: Liechtenstein, Fortuna, Fondos de Jubilación, Generali