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Are iShares Core Allocation ETFs Attractive?

July 19, 2023 • Posted in Strategic Allocation

The four iShares Core Asset Allocation exchange-traded funds (ETF) offer exposures to U.S. stocks, global stocks and bonds semiannually rebalanced to fixed weights, as follows.

  1. iShares Core Conservative Allocation (AOK) – 30% stocks and 70% bonds (30-70).
  2. iShares Core Moderate Allocation (AOM) – 40% stocks and 60% bonds (40-60).
  3. iShares Core Growth Allocation (AOR) – 60% stocks and 40% bonds (60-40).
  4. iShares Core Aggressive Allocation (AOA) – 80% stocks and 20% bonds (80-20).

Each fund holds a portfolio of seven iShares Core stocks and bonds ETFs, thereby compounding management costs and fees. Do these funds of funds offer attractive performance? To investigate, we compare performance statistics for these funds with those for comparably weighted and rebalanced combinations of SPDR S&P 500 Trust (SPY) and iShares 20+ Year Treasury Bond (TLT), or SPY and iShares iBoxx $ Investment Grade Corporate Bond (LQD). We start tests at the end of December 2008 (about a month after inception of the asset allocation ETFs). We ignore semiannual rebalancing frictions for the SPY-TLT and SPY-LQD comparison strategies. Using semiannual dividend-adjusted prices for all specified funds during December 2008 through June 2023, we find that: (more…)

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