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ATT Dials Up A Mediocre Plan

|Includes:AGG, AOA, AOM, AOR, BIV, BND, CIU, DES, DLN, DON, EFA, EZM, GWL, HYG, IDHQ, IJH, IJK, IJR, IUSG, IUSV, IVE, IVV, IVW, IWM, IWP, IWR, IWV, IYY, JKE, JKF, JKG, JKJ, JNK, MDY, MVV, PHB, PWV, PXMC, PXMG, PXSC, QQQ, RFG, RPG, RPV, RSCO, RSP, SAA, SCHA, SCHG, SCHV, SCHX, SPY, AT&T Inc. (T), UWM, VB, VEU, VO, VOT, VTI, VTV, VUG, VV

The AT&T Long Term Savings and Security Plan (Plan) is a defined contribution plan established by AT&T Corp. (ATTC) to provide a convenient way for eligible non-management employees of participating ATTC companies to save on a regular and long-term basis.

We now analyze the AT&T Long Term Savings and Security Plan We will discuss the investment choices and present the plan rating by MyPlanIQ. AT&T and Wal-Mart have similar plans that are restricted in terms of asset classes but we will compare the two as they both Fortune top ten companies.

The ATT 401K plan consists of 25 funds. These funds enable participants to gain exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income.

 

Asset Class Ticker Name
Intermediate-Term Bond VBMFX Vanguard Total Bond Market Index
Mid-Cap Growth RPMGX T. Rowe Price Mid-Cap Growth
LARGE BLEND VTSMX Vanguard Total Stock Mkt Idx
World Allocation RIRFX American Funds Capital Inc Bldr R5
Foreign Large Blend VGTSX Vanguard Total Intl Stock Index
Foreign Large Blend INLBX Morgan Stanley International B
ROOT CASH CASH
LARGE BLEND LMNVX Legg Mason Value Instl
LARGE VALUE VWNFX Vanguard Windsor II
World Allocation PAUIX PIMCO All Asset All Authority Inst
LARGE GROWTH VWUAX Vanguard U.S. Growth Adm
Moderate Allocation USBSX USAA Balanced Strategy
SMALL BLEND TRSSX T. Rowe Price Instl Small-Cap Stock
Moderate Allocation PAAIX PIMCO All Asset Instl
Intermediate-Term Bond FBIDX Fidelity U.S. Bond Index
LARGE BLEND VTSMX Vanguard Total Stock Mkt Idx
LARGE BLEND VFINX Vanguard 500 Index Investor
MID-CAP BLEND VEXMX Vanguard Extended Market Idx
LARGE GROWTH FMAGX Fidelity Magellan
Foreign Large Blend VGTSX Vanguard Total Intl Stock Index
LARGE BLEND FDGFX Fidelity Dividend Growth
MID-CAP BLEND FLPSX Fidelity Low-Priced Stock
High Yield Bond SPHIX Fidelity High Income
Foreign Large Growth FDIVX Fidelity Diversified International
HYBRID ASSETS T AT&T Inc

The list of minor asset classes covered:
Foreign Large Blend: EFA, VEU, GWL, PFA
High Yield Bond: HYG, JNK, PHB
Hybrid Assets:
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 Blend: IJH, IWR, JKG, VO, MDY, EMM, PJG, DON, EZM, MVV
Mid-cap Growth: IJK, IWP, VOT, EMG, PWJ, RFG, UKW
Moderate Allocation: AOM
Small Blend: IJR, IWM, JKJ, VB, DSC, PJM, DES, SAA, UWM, SCHA
World Allocation: AOR, AOA

 

Asset Class ATT Funds Wal-Mart Funds
REITs 0 0
Balanced Fund 4 2
Fixed Income 3 4
Commodity 0 0
Sector Fund 0 0
Foreign Equity 4 4
Emerging Market Equity 0 0
US Equity 12 6
Other 2 0
Total 25 16


We note that the plans are similar in nature with the main difference being in more choices in US and balanced funds. 

As of Dec 23, 2010, this plan investment choice is rated as above 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 above average (77%)
Fund Quality -- Rated as average (50%)
Portfolio Building -- Rated as above average (79%)
Overall Rating: above average (70%)

Portfolio Discussions

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 table (as of Dec 23, 2010)

Currently Commodities, US Equity and Emerging Market are doing well. Only US Equity is available to AT&T Long Term Savings and Security 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 choices and an additional asset class.

We now compare the ATT and Wal-Mart plans.

 Performance table (as of Dec 23, 2010)

As anticipated, the additional fund choices in the asset classes allow the ATT plan to squeeze out an extra point in the TAA although it's too close to call with SAA.

To summarize, both AT&T and Wal-Mart would benefit their employees by adding an extra asset class such as emerging markets or real estate. They both have similar performance but ATT just wins out by virtue of more fund choices.
 

 



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Stocks: T, SPY, VTI, EFA, VEU, AGG, BND, HYG, JNK, PHB, AOM, CIU, BIV, AOR, AOA, GWL, IDHQ, IVE, IUSV, JKF, VTV, PWV, RPV, SCHV, IVV, IYY, IWV, VV, DLN, RSP, SCHX, IVW, IUSG, JKE, VUG, QQQ, RPG, SCHG, IJH, IWR, JKG, VO, MDY, RSCO, PXMC, DON, EZM, MVV, IJR, IWM, JKJ, VB, PXSC, DES, SAA, UWM, SCHA, IJK, IWP, VOT, PXMG, RFG, U