Seeking Alpha
Profile| Send Message|
( followers)  

As of 4/23/2011, Fidelity had 30 commission-free iShares ETFs. These ETFs cover all U.S. equity sizes and styles (large/mid/small caps and growth/blend/value styles), international equity markets as well as good fixed income ETFs. The missing major asset class is commodities. A plan called Fidelity Commission Efficient ETFs extends this plan by including several additional ETFs (which cost a flat $7.95 commission per trade).

The plan consists of 31 funds. These funds enable participants to gain exposure to five major assets: U.S. Equity, Foreign Equity, REITs, Emerging Market Equity, Fixed Income.

Asset ClassTickerName
LARGE VALUEIWDiShares Russell 1000 Value Index
LARGE BLENDIVViShares S&P 500 Index
LARGE BLENDIWBiShares Russell 1000 Index
LARGE BLENDIWViShares Russell 3000 Index
LARGE GROWTHIVWiShares S&P 500 Growth Index
LARGE GROWTHIWFiShares Russell 1000 Growth Index
MID-CAP VALUEIJJiShares S&P MidCap 400 Value Index
MID-CAP BLENDIJHiShares S&P MidCap 400 Index
Mid-Cap GrowthIJKiShares S&P MidCap 400 Growth Index
SMALL VALUEIJSiShares S&P SmallCap 600 Value Index
SMALL VALUEIWNiShares Russell 2000 Value Index
SMALL BLENDIJRiShares S&P SmallCap 600 Index
SMALL BLENDIWMiShares Russell 2000 Index
Small GrowthIJTiShares S&P SmallCap 600 Growth
Small GrowthIWOiShares Russell 2000 Growth Index
WORLD STOCKACWIiShares MSCI ACWI Index
Foreign Large BlendEFAiShares MSCI EAFE Index
Foreign Small/Mid ValueSCZiShares MSCI EAFE Small Cap Index
DIVERSIFIED EMERGING MKTSEEMiShares MSCI Emerging Markets Index
Intermediate-Term BondAGGiShares Lehman Aggregate Bond
Inflation-Protected BondTIPiShares Lehman TIPS Bond
Long-Term BondLQDiShares iBoxx $ Invest Grade Corp Bond
Emerging Markets BondEMBiShares JPMorgan USD Emerg Markets Bond
Muni National LongMUBiShares S&P National Municipal Bond
ROOTCASHCASH
LARGE VALUEIVEiShares S&P 500 Value Index
LARGE VALUEDVYiShares Dow Jones Select Dividend Index
Foreign Large ValueIDViShares Dow Jones Intl Select Div Idx
Foreign Large BlendACWXiShares MSCI ACWI ex US Index
High Yield BondHYGiShares iBoxx $ High Yield Corporate Bd
REAL ESTATEIYRiShares Dow Jones US Real Estate
Asset ClassNumber of funds
Balanced Fund0
REITs1
Fixed Income6
Commodity0
Sector Fund0
Foreign Equity5
Emerging Market Equity1
US Equity17
Other1
Total31

As of May 17, 2012, this plan investment choice is rated as 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 great (92%)
Fund Quality -- Rated as poor (4%)
Portfolio Building -- Rated as above average (78%)
Overall Rating: average (60%)

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 five asset SIB (Simpler Is Better) plan. This SIB plan has the following candidate index funds and their ETFs equivalent:

  • U.S. Equity: SPY or VTI

  • Foreign Equity: EFA or VEU

  • REITs: IYR or VNQ or ICF

  • Emerging Market Equity: EEM or VWO

  • Fixed Income: AGG or BND

Performance chart (as of May 17, 2012)

(click to enlarge)

Performance table (as of May 17, 2012)

Portfolio Name1Yr AR1Yr Sharpe3Yr AR3Yr Sharpe5Yr AR5Yr Sharpe
Fidelity Commission-Free ETFs Tactical Asset Allocation Moderate1%35%10%94%6%53%
Fidelity Commission-Free ETFs Strategic Asset Allocation Moderate-2%10%12%105%2%12%
Five Core Asset ETF Benchmark Tactical Asset Allocation Moderate-1%9%9%82%6%48%
Five Core Asset ETF Benchmark Strategic Asset Allocation Moderate-6%-18%12%83%2%9%

Currently High Yield Bond, Fixed Income and Real Estate are doing well. These asset classes are all available to Fidelity Commission-Free ETFs participants.

What to like for Fidelity Commission-Free ETFs:

  • It has fairly reasonable line ups in fixed income (bonds) that include high yield, emerging market bonds and long- and short-term Treasury bonds. We especially like inflation-protected bonds and believe every portfolio should have this as a candidate fund.

  • It has all nine U.S. style ETFs (i.e. large, mid and small cap with growth, blend and value styles).

What we don't like is that these ETFs still have too high expense ratios compared with Vanguard ETFs and Schwab ETFs.

Disclaimer: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.

Source: Fidelity's Commission-Free ETFs Remain Good For Portfolio Building