Author Topic: Available research on Vanguard decision for target date AA  (Read 339 times)

HeadedWest2029

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Available research on Vanguard decision for target date AA
« on: November 08, 2018, 11:32:28 AM »
Is anyone aware of Vanguard literature that walks through their reasons for choosing the asset allocation they use in the various target date funds?  Specifically, going with a roughly 55/35 split on domestic vs international for the 2060 fund.  I get the bond allocation, but I'd be curious what research they did to arrive at 55/35.  Knowing Vanguard, I figure it has to be based on some hard back-tested evidence so I tend to follow their lead while not buying the target date fund directly.

MustacheAndaHalf

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Re: Available research on Vanguard decision for target date AA
« Reply #1 on: November 09, 2018, 07:10:24 AM »
Sounds like you might want to read Vanguard's white paper on Global Diversification.
https://www.vanguard.com/pdf/ISGGEB.pdf

HeadedWest2029

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Re: Available research on Vanguard decision for target date AA
« Reply #2 on: November 09, 2018, 07:53:39 AM »
Thanks! Exactly what I was looking for
TLDR take is although the global market cap between US and International is roughly 50/50 (part of my confusion), Vanguard goes with a US tilt (55/35 in the case of the 2060 target date fund) because back-testing has shown that is the optimal point for reducing volatility in a diversified global portfolio with considerations for international investing being a little more expensive to invest in.  Most of the volatility benefit can be achieved with as little as 20% international for those who wish to maintain higher US equity allocations, but 30-35% seems to be the sweet spot.