I don't like to use Target Retirement funds. I'm more of a tinkerer myself with my asset allocation.
Total Stock Market Index looks like a solid fund.
Do you already have VTSMX in your Roth IRA? Because the minimum initial purchase on that is $3K.
If you are 50/50 between those two, your overall allocation is like 77% VTSMX, 18% Total International, 5% Bond. If that's the allocation you want, this is a way to do it with relatively little money, and more power to you. At some point it will be cheaper to shift away from a target-date fund to a 3-fund portfolio (I'm personally not sold on international bonds being necessary, particularly at under 2% of a portfolio).
symbol | name | percentage of AA | expense ratio |
VTSMX | Vanguard Total Stock Market Index Fund Investor Shares | 54.0% | 0.17% |
VGTSX | Vanguard Total International Stock Index Fund Investor Shares | 35.9% | 0.22% |
VBMFX | Vanguard Total Bond Market II Index Fund Investor Shares† | 7.1% | 0.20% |
VTIBX | Vanguard Total International Bond Index Fund Investor Shares | 3.0% | 0.23% |
Minor point - the Total Bond Market II ER is 0.1%. So the ER is the weighted average of the constituent funds, but your analysis holds due to not being able to actually buy Total Bond Market II outside of the target-date funds.
symbol name percentage of AA expense ratio VTSMX Vanguard Total Stock Market Index Fund Investor Shares 54.0% 0.17% VGTSX Vanguard Total International Stock Index Fund Investor Shares 35.9% 0.22% VBMFX Vanguard Total Bond Market II Index Fund Investor Shares† 7.1% 0.20% VTIBX Vanguard Total International Bond Index Fund Investor Shares 3.0% 0.23%
The target-retirement fund expense ratio is 0.16%, which is better than the weighted average of the constituent funds. However, those are all Investor share-class funds. The ETF (and Admiral share-class) versions are cheaper.
Holding a target date fund as part of your portfolio along with other funds defeats that purpose -- at that point, you might as well just buy the constituent funds to replicate the AA yourself and save some fees.
How long until you retire? 2055 is 39 years from now. Might not make sense unless you really do plan on retiring at that time. I would go with VTSMX.
I don't like to use Target Retirement funds. I'm more of a tinkerer myself with my asset allocation.
Total Stock Market Index looks like a solid fund.
I am not really into tinkering, so I would like to hold onto an index fund. Is that a terrible idea?
What is the aversion to target date funds? I'm new to investing and that's currently where my 401K contributions reside.
Holding a target date fund as part of your portfolio along with other funds defeats that purpose -- at that point, you might as well just buy the constituent funds to replicate the AA yourself and save some fees.
So did I make a $3000 mistake buying VTSMX found even though I have this fund as a part of index fund? Should I sell it when the fund goes above water?
Also, based on your point, I will contribute 100% to the target date fund.How long until you retire? 2055 is 39 years from now. Might not make sense unless you really do plan on retiring at that time. I would go with VTSMX.
I will be 72 years old in 2055. I think I am not sure if I will be working until then or not. I picked this fund at the time I didn't really understand retirement, and I know my grandfather worked into this 70s, and I thought I will retire in my 70s as well. My outlook has changed since then...
Minor point - the Total Bond Market II ER is 0.1%. So the ER is the weighted average of the constituent funds, but your analysis holds due to not being able to actually buy Total Bond Market II outside of the target-date funds.
Holding a target date fund as part of your portfolio along with other funds defeats that purpose -- at that point, you might as well just buy the constituent funds to replicate the AA yourself and save some fees.
So did I make a $3000 mistake buying VTSMX found even though I have this fund as a part of index fund? Should I sell it when the fund goes above water?
Also, based on your point, I will contribute 100% to the target date fund.
How long until you retire? 2055 is 39 years from now. Might not make sense unless you really do plan on retiring at that time. I would go with VTSMX.
I will be 72 years old in 2055. I think I am not sure if I will be working until then or not. I picked this fund at the time I didn't really understand retirement, and I know my grandfather worked into this 70s, and I thought I will retire in my 70s as well. My outlook has changed since then...
Maybe I'm missing something. I see a different expense ratio attached to Vanguard target date funds through my company sponsored 401K. I see 0.06%. I thought that was pretty low. Here are my available options... AGH! Do I switch? What do you think?