Advice Not Enough in First Half

For the first time since the index was introduced 18 months ago, the aggregate impact of advice for each of the six age/risk tolerance portfolios provided a negative return. Those investment advice selections provided a much more diverse result at December 31 (see Advice Recommendations Fare Well in Volatile Market ).

Slumping Returns

An aggressive investor in the 50-55 age bracket could have seen their portfolio lose 8.23% during the first six months of the year, compared with a 6.69% loss for a large cap equity index fund in the same period. However, the aggregate portfolio suggested by advisor models in the index for a moderately aggressive investor in the 37-44 age group might have lost 12.55%.

During the same period, the three-month Treasury bill returned 2.27%. Through June 30 the small cap Russell 2000 rose 6.02%, but the Dow lost 2.64%, and the NASDAQ was 12.55% lower than it began the year.

The Advisory Index returns and risk profiles for the six months ended June 30, 2001, were:

While the numbers themselves offer no perspective on the relative merits of any one advice provider, they do provide a sense of the type returns typical participant asset allocation models might experience.

The Advisory Index ( www.chalk401k.com ) is based on asset allocations for Age Range, Risk Characteristics (moderate or aggressive) and asset allocation choices sometimes available to participants in a 401(k) plan. The Index is a measurement tool for 401(k) plan participants only.

The Index rebalances on January 1st and July 1st.

The CHALK 401(k) Advisory Index is derived as the result of professional asset allocations submitted prior to the measurement period. According to the company, the Index is representative of professional 401(k) Investment Advice as submitted by national 401(k) investment advice providers.

Participating firms (professional Investment Advice vendors) who submit asset allocations for the 401(k) Advisory Index are required to submit asset allocations prior to the beginning of each six-month measurement period. Asset allocations are made among active and passive investment options.

Participating Investment Advice firms are not required to alter allocations; however, they do have the opportunity to revise allocations prior to each December 31 and June 30.

– Nevin Adams                        editors@plansponsor.com

Also see our Special Report on Online Advice, Filling the Seats .

More on the Chalk 401(k) Index at Too Soon To Judge Performance?

MORE on Participant Education and Advice in our SOLUTIONS topic.