Tag Archives: etf-only retirement plan

Should You Have An All-ETF Portfolio? Betterment CEO Has An Answer

MarketMuse update is courtesy of CNBC. CEO and Founder of Betterment , Jon Stein, offered his commentary on this issue to CNBC. Betterment is an automated investing service that provides optimized investment returns for individual, IRA, Roth IRA & rollover 401(k) accounts.

There’s a natural progression in the way the public responds to innovation. Something that first seems like a mere novelty becomes an interesting new niche, then a great idea and then, “How did we ever get along without this?”

In financial services, exchange-traded funds are somewhere around the third or fourth stage, between new niche and great idea. ETFs attracted more net investment last year ($239 billion) than did mutual funds ($225 billion), according to data from Morningstar. Five years earlier the net inflow into mutual funds was more than triple the net amount invested in ETFs.

In the last five years, the public’s affinity for ETFs raised assets under ETF management by 152 percent, to $2 trillion, up from $793 billion. Mutual fund assets only rose 53 percent during the same period.

Faster and cheaper information system infrastructure has helped the growth of ETFs. In my view, ETF portfolios will be the inevitable default for investors in the years to come because they are lower cost, more transparent and offer greater liquidity and tax advantages than mutual funds. Already, the increasing number of assets invested with automated investing services, which use all-ETF portfolios, underscores this shift.

Lower cost

By passively and systematically tracking an index, ETFs are far cheaper to run than most actively managed mutual funds that employ portfolio managers and analysts to select securities. That research costs money, and so does the frequent trading that’s common in such funds—they call it “active management” for a reason—not to mention the buying and selling of fund shares themselves, transactions that always involve the fund provider.

More transparent

ETFs also feature greater transparency. Their underlying portfolios change more rarely because the indexes that they’re based on generally maintain stable lists of components. The high turnover of many mutual funds and the fact that their holdings are reported only four times a year can make it difficult for shareholders to know exactly what they’re holding.

It’s not just the specific securities that can keep mutual fund investors in the dark. The broad nature of the fund itself can become obscured by what’s called “style drift.” Say growth is outperforming value; the managers of value funds, consciously or not, may start tilting toward more growth-oriented stocks.

Depending on what else they own, shareholders may become overweight in growth stocks and not even know it. By contrast, a value-stock ETF will hold value stocks no matter what.

ETFs are more transparent in another sense. The very low expenses and commoditized nature of ETFs make commissions and “kickbacks” to brokers or retirement-plan sponsors impractical. So if an ETF is recommended by an advisor or made available by a broker or retirement-plan sponsor, it’s likely to be an unbiased recommendation.

For the complete article from CNBC, click here

#Apple Makes The Move to All-ETF Retirement Plans: Benzinga.com




Whoaaa!…EDITOR NOTE RE: story below–re-distributed June 6 by this platform ONLY AFTER numerous ‘highly-accredited’ news outlets did the same earlier that day, has since been overtly challenged for its accuracy/veracity by IndexUniverse  . 

In hindsight, IU’s challenging multiple media outlets that regurgitated this story for a failure on the part of mainstream journalism in general is harsh, but not unwarranted when considering the overall decline of reporting. This is double-edged sword of an all-web world that enables and demands a 24/7 news cycle, which is powered by emotion and a lust for breaking stories–as opposed to well-researched reporting.

Without anyone having the benefit of actually being able to speak with any AAPL HR/Benefits execs to confirm or deny the elements of the story first written by  SourceMedia Inc.’s  Employee Benefit News, we respectfully caveat that EBN ‘s senior editor (who is the by-line author) either failed to do any fact-checking, or perhaps the story she attempted to write is that Apple Inc.’s HR/Benefits team plans on introducing yet another investment opportunity, within a presumably long list of funds that large company employees can invest their 401k money into.  To our valued audience, we–as well as Benzinga’s reporter are contrite for any role we might have inadvertently played in reporting what might end up being an inaccurate or erroneous report from SourceMedia’s Employee Benefit News.

All of that aside, the concept of offering an ETF-specific investment program within a list of options for employees of large and or small companies makes perfect sense. Charles Schwab has certainly acknowledged that it is working on such an investment program, albeit it is apparently still in development.


By Benzinga.com

Apple AAPL +1.53% , the largest U.S. company by market value, is once again setting a standard for innovation, but this time the innovation isn’t coming by way of the iPhone, iPad or Apple TV. Rather the company is making the move to an ETF-only retirement plan for its employees.

While the exchange-traded products has grown by leaps and bounds in recent to almost 1,470 total products with over $1.13 trillion in assets under management at the end of May, ETFs still are not prominently used in in company-sponsored retirement plans such as 401(k) plans. That market is still largely dominated by mutual funds.

At the end of 2010, ETF assets in 401(k) plans were scant at just $5 billion, or 0.2% of total assets, compared to $1.8 trillion, or 58% of 401(k) assets, according to Cerulli Associates. However, some firms are pushing the ETF/401(k) issue. For example, ExpertPlan announced that it will add more than 900 ETFs, including those offered by Barclays, Claymore, First Trust, iShares, Rydex and Wisdomtree, according to ETF Trends.

Charles Schwab SCHW +2.27% , the eleventh-largest U.S. ETF sponsor, has been working on an ETF-only 401(k) plan that would use index-based ETFs. Capital One’s COF +0.68% ING Direct offers index ETFs in its Sharebuilder 401(k) plan, and T.D. Ameritrade AMTD +2.41% also includes ETF options in its 401(k) plan, ETF Trends noted earlier this year.

But the move by Apple, not only the largest, but the most innovative U.S. company in the eyes of many, to all-ETF retirement plans stands as the strongest endorsement to date of the utility of ETFs when it comes to retirement planning. Continue reading