Friday, April 20, 2012

U.S. Government 401k (TSP) Plan Scan 12-31-2011




Each portfolio in a scan has a standard deviation computed after the scan assuming the investment options are independent. It is time consuming to collect annual total return data for all the investment options in a 401k Plan and then compute the covariance matrix for those 401k Plan investment options. That is what I had to do to for the chart posted above. As you can see this Uniform portfolio standard deviation is twice as high as the one computed assuming independent Uniform portfolio investment options. You can read more on this technical issue in TechNote 2012-1 referenced in the covariance chart. There is a link to the TechNote from this blog. This issue is related to the public comment I made to the SEC on Target Date Retirement Names and Marketing July 5, 2010. That Note is still online at www.sec.gov/comments/s7-12-10/s71210.shtml.

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