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JPMorgan Chase (NYSE: JPM) is one of the oldest financial institutions in the United States. With a history dating back over 200 years.

The company claims:

  • Leadership in global financial services with assets of $2 trillion.
  • Operation in more than 60 countries.
  • More than 200,000 employees.
  • A leader in investment banking, financial services
  • Their stock is a component of the Dow Jones Industrial Average
2010 Review

2010 was a good year for equities -- especially in the US and 2011 starts with risk chasing evident. Despite this, we may see subdued market: stocks are not cheap. Investors should keep a cool head and manage their portfolios systematically. Plans with access to emerging markets, real estate and commodities are likely to benefit along with the assumed staple of US equities. Plans will also want to have an array of bond choices as the current market conditions challenge established assumptions as to what is safe.

Their 401K plan consists of 14 funds. These funds enable participants to gain exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income.

The list of minor asset classes covered:
Foreign Large Blend: EFA, VEU, GWL, PFA
Intermediate Government: IEI, VGIT, ITE
Intermediate-term Bond: AGG, CIU, BIV, BND
Large Blend: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX
Large Growth: IVW, IWZ, JKE, VUG, ELG, QQQQ, RPG, SCHG
Large Value: IVE, IWW, JKF, VTV, ELV, PWV, RPV, SCHV
Mid-cap Growth: IJK, IWP, VOT, EMG, PWJ, RFG, UKW
Small Blend:IJR, IWM, [[JKJ], VB, DSC, PJM, DES, SAA, UWM, SCHA
Us Equity: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX

Asset Class Number of funds
REITs 0
Balanced Fund 0
Fixed Income 3
Commodity 0
Sector Fund 0
Foreign Equity 1
Emerging Market Equity 0
US Equity 9
Other 1
Total 14


This is an old style plan with diversification in US equities but scant choices elsewhere. While the US economy is doing well, this plan will likely flourish but will suffer in turbulent times.

As of Jan 13, 2011, this plan investment choice is rated as below 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 poor (7%)
Fund Quality -- Rated as average (56%)
Portfolio Building -- Rated as below average (24%)
Overall Rating: below average (28%)

The company has the ability to select good funds as they are in the business but they would score much more highly with a better distribution in other asset classes.

Portfolio Analysis

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 Jan 13, 2011), click to enlarge

Performance table (as of Jan 13, 2011)

Currently US Equity, Commodities and Real Estate are doing well. Only US Equity is available to The J.P. Morgan Chase 401k Savings Plan participants.

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 and international equity choices and an additional asset class.

As a leader in the financial market, it is surprising that their 401K plan is so mediocre. The J.P. Morgan Chase 401k Savings Plan would do well by their employees to consider reviewing their existing funds and adding an additional asset class.

Being in the top echelon of the world's companies and in finance, we would have hoped for a better retirement offering. That would be strengthening the bond choices and providing more choices in more asset classes including emerging markets, real estate and commodities.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: JPMorgan Chase: Top Tier Company, Second Tier Retirement Plan