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MyPlanIQ.com is the only web application that offers advanced asset allocation strategies customized to a wide range of retirement and taxable investment plans such as 401(k), IRA and brokerage accounts. The unique key advantages of MyPlanIQ.com are 1. Superior investment strategies with high... More
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  • Fidelity Annuity For Those Investing for Income 0 comments
    Nov 16, 2010 9:15 PM | about stocks: AGG, AOK, AOM, BIV, BND, BSV, CIU, CSJ, DBC, DBE, CCXE, DBR, DBU, DEM, DES, GNAT, DLN, DON, DPN, DRF, SLY, DWM, EEM, EFA, EFG, EFV, SPYG, SPYV, MDYG, RSCO, MDYV, EXI, EZM, GBF, GII, GMM, GWL, HYG, ICF, IGE, IJH, IJJ, IJK, IJR, IOO, IP, IPF, IPW, ITE, IVE, IVV, IVW, IWM, IWP, IWR, IWS, IWV, IWW, IWZ, IXC, IXJ
    In a previous article we summarized some of the major variable annuity products.

    During our analysis, it became clear that the collection of funds that make up the subaccounts were well chosen and provide the foundation for a high performance portfolio.

    This can be useful for those who already have a variable annuity and want to get the most out of it, or for those who are considering purchasing a variable annuity or for those who want to learn how to put together a good set of fund choices.

    In this case we are going to examine Fidelity Personal Retirement Annuity

    The Fidelity Personal Retirement Annuity's plan consists of 56 funds. These funds enable participants to gain exposure to 5 major assets: US Equity, Foreign Equity, REITs, Emerging Market Equity and Fixed Income.

    Asset Class

    Number of funds

    US

    13

    International

    5

    Sector

    12

    Balanced

    8

    Fixed income

    7

    Emerging Markets

    3

    Real estate

    1

    Target Date

    7


    There are a selection of target date and balanced funds that can be selected but would not be part of an overall portfolio.

    The plan rating for this annuity is above average at 85% and the breakdown is:

    Diversification

    96%

    great

    Fund Quality

    65%

    above average

    Portfolio Building

    90%

    great

    Overall Score

    85%

    above average



    With five asset classes, diversification is going to be strong.

    We will step through each of the asset classes to outline why the fund quality while good is not yet outstanding.

    US Funds

    LARGE BLEND

     FUSVX

     Fidelity Spartan U.S. Equity Index

    LARGE GROWTH

     FCNTX

     Fidelity Contrafund

    LARGE GROWTH

     FSGFX

     Strategic Advisers Growth

    LARGE GROWTH

     FGIOX

     Fidelity Advisor Growth & Income

    LARGE GROWTH

     FAGCX

     Fidelity Advisor Growth Opportunities

    LARGE GROWTH

     EQPGX

     Fidelity Advisor Equity Growth

    LARGE VALUE

     EQPIX

     Fidelity Advisor Equity Income

    LARGE VALUE

     FVLIX

     Fidelity Advisor Value Leaders

    MID-CAP BLEND

     FASOX

     Fidelity Advisor Value Strategies

    Mid-Cap Growth

     FRVIX

     Fidelity Advisor Growth Strategies

    Mid-Cap Growth

     FMCCX

     Fidelity Advisor Mid Cap

    MID-CAP VALUE

     FVIFX

     Fidelity Advisor Value

    SMALL BLEND

     FSCIX

     Fidelity Advisor Small Cap


    The US funds provide access to large, mid and small cap funds. Large Cap funds are probably overweighted, especially on growth. Having more mid cap value and small cap value would improve the portfolio slightly. Nevertheless, this is a high scoring section. 

    International Funds

    Foreign Large Blend

     FAOIX

     Fidelity Advisor Overseas

    Foreign Large Blend

     WPETX

     Credit Suisse Trust Intl Eq Flex

    Foreign Large Blend

     INLDX

     Morgan Stanley International

    Foreign Large Growth

     FCPIX

     Fidelity Advisor Intl Capital App

    Foreign Large Value

     IVQDX

     Morgan Stanley Intl Value Equity

    World Stock

     FGEBX

     Fidelity Advisor Global Cap Apprec 


    This is a good international section. Large cap are overweighted, medium and small cap funds would be a good upgrade.

    Emerging markets

    Emerging Markets

     FIMKX

     Fidelity Advisor Emerging Markets

    Emerging Markets

     LZEMX

     Lazard Emerging Markets Equity Instl

    Emerging Markets

     MGEMX

    Morgan Stanley Emerging Markets


    Three alternative funds in this category is a good choice. It may be that having some large or mid-cap blend would provide a good alternative.

    Real Estate

    REAL ESTATE

     FHEIX

     Fidelity Advisor Real Estate


    Real estate is under represented -- an international REIT would strengthen this asset class.

    Fixed Income

    Emerging Markets Bond

     MSIEX

     Morgan Stanley Emg Mkts Debt

    High Yield Bond

     FHNIX

     Fidelity Advisor High Income I

    Inflation-Protected Bond

     PRRIX

     PIMCO Real Return Instl

    Intermediate-Term Bond

     FBNDX

     Fidelity Investment Grade Bond

    Intermediate-Term Bond

     PTTRX

     PIMCO Total Return Instl

    Cash

     CASH

     Money Market

    Short-Term Bond

     PTLDX

     PIMCO Low Duration Instl


    The fixed income class is well balanced with good choices and diversification.

    Even without going into the balanced funds, there are enough funds here to build a solid portfolio. 

    While the managed funds are available, the fee structure is such that the returns are going to leak into other people's pockets and it will pay you to be on top of your own investments -- either directly or through a professional.

    The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies (SAA and TAA, both provided by MyPlanIQ). For comparison purpose, we also include the moderate model portfolios of a typical 5 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
    REITs : IYR or VNQ or ICF
    Emerging Market Equity :EEM or VWO
    Fixed Income :AGG or BND

    Performance chart (as of Nov 15, 2010)

    Performance table (as of Nov 15, 2010)

    There is an opportunity to build good returns and benefit from the tax free gains while mitigating the known high fees of this type of instrument.

    There are certainly the funds in the plan to make this possible and overlaying a tactical asset allocation is empowered by the range and richness of the funds.
     








    Disclosure: No Positions
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