Amazon.com AMZN is the largest online book and goods seller. It was founded in 1994 and is headquartered in Seattle, Washington. It pioneered in online ecommerce and has been very successful in its aggressive business expansion. When it comes to its retirement plan investment choices, however, it provides a somewhat U.S. centric and old style plan.
The Amazon.com 401K Plan consists of 12 funds. These funds enable participants to gain exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income. This is a very conventional retirement plan that has been clearly U.S. and developed countries centric.
| Asset Class | Ticker | Name |
|---|---|---|
| LARGE GROWTH | RGAEX | American Funds Growth Fund of Amer R4 |
| LARGE BLEND | VFINX | Vanguard 500 Index Investor |
| LARGE GROWTH | VFTSX | Vanguard FTSE Social Index Inv |
| LARGE VALUE | VWNFX | Vanguard Windsor II |
| MID-CAP BLEND | VSEQX | Vanguard Strategic Equity |
| SMALL VALUE | AVPAX | American Beacon Small Cp Val Plan |
| Small Growth | VEXPX | Vanguard Explorer |
| Foreign Large Blend | JIEIX | Artio International Equity I |
| Intermediate-Term Bond | PTTRX | PIMCO Total Return Instl |
| Retirement Income | VTINX | Vanguard Target Retirement Income |
| US EQUITY | AMZN | Amazoncom Inc |
| Money Market |
The list of minor asset classes covered:
Foreign Large Blend: EFA, VEU, GWL, PFA
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
Retirement Income:
Small Growth: IJT, IWO, JKK, VBK, DSG, PWT, RZG, UKK
Small Value: IJS, IWN, JKL, VBR, DSV, PWY, RZV, UVT
Us Equity: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX
| Asset Class | Number of funds |
|---|---|
| REITs | 0 |
| Balanced Fund | 1 |
| Fixed Income | 1 |
| Commodity | 0 |
| Sector Fund | 0 |
| Foreign Equity | 1 |
| Emerging Market Equity | 0 |
| US Equity | 8 |
| Other | 9 |
| Total | 12 |
As of Mar 21, 2011, this plan investment choice is rated as below 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 average (43%)
Fund Quality -- Rated as below average (19%)
Portfolio Building -- Rated as average (38%)
Overall Rating: below average (34%)
Since Amazon.com was founded in 1994, the world has gone through dramatic changes. Globalization has enabled countries like China, India and Brazil to emerge as strong economic powers in the world, partly due to the rapid development in internet and communication. Ironically, Amazon.com, while being aggressive to pursue its cutting edge business practice and technology, has provided its employees a very traditional retirement plan that lacks of other major asset exposure including emerging market stocks and real estate investments (REITs). This is reflected in the performance of the following model portfolios that adopt asset allocation strategies: strategic and tactical asset allocation strategies (SAA and TAA for participants in Amazon.com 401K Plan).
Strategic Asset Allocation is based on well known modern portfolio theory and its key features include: diversification, proper fund selection and periodically re-balancing.
Tactical Asset Allocation works on a diversified array of assets provided by funds in a plan and adjusts asset mixes based on market conditions such as asset price momentum utilized by TAA.
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 chart (as of Mar 21, 2011)
Performance table (as of Mar 21, 2011)
| Portfolio Name | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
|---|---|---|---|---|---|---|
| Amazon.com 401K Plan Tactical Asset Allocation Moderate | 4% | 32% | 7% | 70% | 8% | 70% |
| Amazon.com 401K Plan Strategic Asset Allocation Moderate | 7% | 60% | 4% | 26% | 5% | 30% |
| Three Core Asset ETF Benchmark Tactical Asset Allocation Moderate | -2% | -32% | 2% | 16% | 4% | 28% |
| Three Core Asset ETF Benchmark Strategic Asset Allocation Moderate | 11% | 69% | 4% | 13% | 4% | 14% |
Currently Commodities, Real Estate and US Equity are doing well. Only US Equity is available to Amazon.com 401K 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.
To summarize, Amazon.com 401K Plan would do well by their employees to consider reviewing their existing funds and adding additional asset classes such as REITs and emerging market stocks.
Symbols:AMZN,SPY,VTI,EFA,VEU,AGG,BND,IVV,IYY,IWV,VV,DLN,RSP,SCHX,CIU,BIV,GWL,PFA,IVE,IWW,JKF,VTV,ELV,PWV,RPV,SCHV,IVW,IWZ,JKE,VUG,ELG,QQQQ,RPG,SCHG,IJH,IWR,JKG,VO,MDY,EMM,PJG,DON,EZM,MVV,IJS,IWN,JKL,VBR,DSV,PWY,RZV,UVT,IJT,IWO,JKK,VBK,DSG,PWT,RZG,UKK,
Exchange Tickers:(AMZN),(SPY),(VTI),(EFA),(VEU),(AGG),(BND),(IVV),(IYY),(IWV),(VV),(DLN),(RSP),(SCHX),(CIU),(BIV),(GWL),(PFA),(IVE),(IWW),(JKF),(VTV),(ELV),(PWV),(RPV),(SCHV),(IVW),(IWZ),(JKE),(VUG),(ELG),(QQQQ),(RPG),(SCHG),(IJH),(IWR),(JKG),(VO),(MDY),(EMM),(PJG),(DON),(EZM),(MVV),(IJS),(IWN),(JKL),(VBR),(DSV),(PWY),(RZV),(UVT),(IJT),(IWO),(JKK),(VBK),(DSG),(PWT),(RZG),(UKK)
Disclosure:
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.
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