Author Topic: Thoughts on a target date fund?  (Read 6189 times)

Bartleby_the_Scrivener

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Thoughts on a target date fund?
« on: December 14, 2016, 06:49:14 PM »
I've been looking at VTTSX as the sole fund for an IRA. Any thoughts?

Radagast

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Re: Thoughts on a target date fund?
« Reply #1 on: December 14, 2016, 09:28:29 PM »
That looks like a great choice. In about 30 years it will start to glide slowly from 90% stocks 10% bonds to 30% stocks 70% bonds (assuming Vanguard doesn't change things between now and then). If you want one that doesn't change, the LifeStrategy Growth fund has a constant 80% stocks 20% bonds. Otherwise you can switch to the 80/20 or 60/40 funds at any time if you are coming up on your goal.
Edit: life strategy not life style
« Last Edit: December 17, 2016, 01:12:03 PM by Radagast »

Bartleby_the_Scrivener

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Re: Thoughts on a target date fund?
« Reply #2 on: December 16, 2016, 07:52:32 PM »
I like the fact that it rebalances automatically, too. We have something similar in my company's 401k, but the selection of underlying funds isn't great.

Metric Mouse

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Re: Thoughts on a target date fund?
« Reply #3 on: December 17, 2016, 08:15:52 AM »
I'm a fan, mostly because I'm lazy. Don't keep my entire portfolio in such, but the portion that I do has done acceptably well with the zero input I've had into it - which fits my level of motivation perfectly.

cincystache

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Re: Thoughts on a target date fund?
« Reply #4 on: December 18, 2016, 12:00:52 PM »
good plan. If I'm ever talking to a friend or family member about investing advice and their eyes start to glaze over I just tell them to throw everything in a vanguard target retirement account and let it grow for 30 years. By far the easiest strategy that would beat 80% of all other strategies with about 5% of the time and effort IMO.


spooky105

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Re: Thoughts on a target date fund?
« Reply #5 on: December 18, 2016, 01:31:18 PM »
Agreed. The auto-balancing and glide-path saves you work day-to-day or year-to-year. Getting in that hands-off mindset also reduces the risk that you will start messing with things, particularly during a market drop which is often the worst time to make a change.

Seppia

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Re: Thoughts on a target date fund?
« Reply #6 on: December 18, 2016, 02:48:45 PM »
The "VTSAX gives you good enough exposure to non usa markets" is a statement that goes against the same logic of indexing, and is ultimately proven false by numbers.

Bateaux

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Re: Thoughts on a target date fund?
« Reply #7 on: December 18, 2016, 06:02:09 PM »
The "VTSAX gives you good enough exposure to non usa markets" is a statement that goes against the same logic of indexing, and is ultimately proven false by numbers.

I sold most of my target date funds and bougt index funds a few years ago.   I'm no fan of bonds. 

waltworks

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Re: Thoughts on a target date fund?
« Reply #8 on: December 18, 2016, 08:57:43 PM »
The "VTSAX gives you good enough exposure to non usa markets" is a statement that goes against the same logic of indexing, and is ultimately proven false by numbers.

Vanguard target date funds generally hold US stocks (your VTSAX) as well as US bonds, international stocks, and international bonds. I believe it's about 70/30 US/international but it might vary quite a bit between specific funds - regardless, the target date stuff does NOT just hold a bunch of VTSAX.

Does your statement have something to do with the OP's question or were you just throwing something out there?

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SeattleCPA

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Re: Thoughts on a target date fund?
« Reply #9 on: December 19, 2016, 08:02:01 AM »
VTTSX is Vanguard's 2060 Target Retirement Fund:

https://personal.vanguard.com/us/funds/snapshot?FundId=1691&FundIntExt=INT

For what it's worth, I absolutely love target retirement funds.

Last summer, in fact, I wrote an ebook (which got some nice reviews from other financial writers but was a total commercial flop)... but my idea was to see if one could create a really short, boilerplate retirement plan that would produce great results in just about any situation... that book (which wasn't about FIRE but was about FI) argued that cheap target retirement funds are tough to beat over any long haul and keep things super-clean.

Here's that plan, which I called the thirteen word retirement plan:

$5,500 annually into an IRA or 401(k) invested in cheap target retirement funds

P.S. Full disclosure: I don't myself use target retirement fund because I'd already done my retirement savings by the time they become available. But I've recommended them to my kids and to my parents.

Seppia

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Thoughts on a target date fund?
« Reply #10 on: December 19, 2016, 08:16:10 AM »
The "VTSAX gives you good enough exposure to non usa markets" is a statement that goes against the same logic of indexing, and is ultimately proven false by numbers.

Vanguard target date funds generally hold US stocks (your VTSAX) as well as US bonds, international stocks, and international bonds. I believe it's about 70/30 US/international but it might vary quite a bit between specific funds - regardless, the target date stuff does NOT just hold a bunch of VTSAX.

Does your statement have something to do with the OP's question or were you just throwing something out there?

-W


For some reason I thought I was responding to a post stating more or less

"I subscribe to the jlcollins idea that you do not need international because VTSAX gives you enough exposure to international markets".

So either a comment was removed, or I was drunk.
:)

Radagast

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Re: Thoughts on a target date fund?
« Reply #11 on: December 19, 2016, 08:54:27 AM »
The "VTSAX gives you good enough exposure to non usa markets" is a statement that goes against the same logic of indexing, and is ultimately proven false by numbers.

Vanguard target date funds generally hold US stocks (your VTSAX) as well as US bonds, international stocks, and international bonds. I believe it's about 70/30 US/international but it might vary quite a bit between specific funds - regardless, the target date stuff does NOT just hold a bunch of VTSAX.

Does your statement have something to do with the OP's question or were you just throwing something out there?

-W


For some reason I thought I was responding to a post stating more or less

"I subscribe to the jlcollins idea that you do not need international because VTSAX gives you enough exposure to international markets".

So either a comment was removed, or I was drunk.
:)
There was a post called "Changing funds to match Mr. Collins book".

waltworks

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Re: Thoughts on a target date fund?
« Reply #12 on: December 19, 2016, 09:47:04 AM »
Weird, sorry to jump on you there. I guess someone edited their post?

In any case, yay target date funds that have cheap fees!

-W

LadyStache in Baja

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Re: Thoughts on a target date fund?
« Reply #13 on: December 19, 2016, 02:45:52 PM »
So are Vanguard's target date funds expense ratios as low as me doing it myself?

(I don't mind rebalancing...in fact I think it's fun.  But if I didn't have to do it, I shouldn't waste my time)

SeattleCPA

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Re: Thoughts on a target date fund?
« Reply #14 on: December 19, 2016, 04:50:54 PM »
If you have admiral class shares, you can build a cheaper portfolio with those.

But Vanguard's target retirement fund ratios are pretty economical.

This is a totally left field comment to make to a younger crowd, but as a CPA I see older folks and then widows (or widowers) who get really overloaded with the rebalancing stuff.

So if you're one half of a couple and you want to think really long term, you might also consider how comfortable and capable your partner will be if you're gone.

gatorNic

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Re: Thoughts on a target date fund?
« Reply #15 on: December 23, 2016, 04:28:34 PM »
I moved out of the target date funds when I found that the the different vanguard index funds had a much lower expense ratio.  Given the target fund is overall low, but the vanguard index funds were even lower.  I am fine balancing myself.  I mean you could just balance every five years and be totally fine.  It's really not that hard.  You could even keep an eye on the target date fund and mimic the balance easily.

Example of change on mine:
BTC LIFE Path 2045 Index - 0.11% Exp ($ 1.10 per $1000)

Changed out to several funds, but couple of examples
Vanguard Institutional Index Fund Institutional Plus Shares - .02% ($ 0.20 per $1000)
Vanguard Total Stock Market Index Fund Institutional Shares - .04% ($ 0.40 per $1000)

So talking anywhere from 1/2 to 1/5 the expense ratio on ones available to me

Gunny

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Re: Thoughts on a target date fund?
« Reply #16 on: December 24, 2016, 06:03:25 AM »
Target date funds do generally have slightly higher expenses since they rebalance more often.  I'm not a fan in general of target date funds as they tend to be bond heavy at maturity.  What if the market is on a tear when the funds mature and you miss out on resulting gains?  Of course the reverse argument can be made.  I would rather keep a steady allocation of 80/20 or 90/10.  It's really not that big a deal to rebalance at years end if you are sticking to a handful of quality index funds.  I want those higher equity allocations during retirement as my planned retirement extends past 30 years. There has been a lot of recent research done which suggest that stock heavy portfolios are more successful for early/long term retirees.   
« Last Edit: December 24, 2016, 06:08:53 AM by Gunny »

Metric Mouse

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Re: Thoughts on a target date fund?
« Reply #17 on: December 27, 2016, 08:04:47 AM »
Target date funds do generally have slightly higher expenses since they rebalance more often.  I'm not a fan in general of target date funds as they tend to be bond heavy at maturity.  What if the market is on a tear when the funds mature and you miss out on resulting gains?  Of course the reverse argument can be made.  I would rather keep a steady allocation of 80/20 or 90/10.  It's really not that big a deal to rebalance at years end if you are sticking to a handful of quality index funds.  I want those higher equity allocations during retirement as my planned retirement extends past 30 years. There has been a lot of recent research done which suggest that stock heavy portfolios are more successful for early/long term retirees.

Can always sell the "2050" fund in 2030 and buy into the "2080" fund - call it a bi-decadal rebalance.

MichaelB

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Re: Thoughts on a target date fund?
« Reply #18 on: December 27, 2016, 08:59:59 AM »
Target date funds do generally have slightly higher expenses since they rebalance more often.  I'm not a fan in general of target date funds as they tend to be bond heavy at maturity.  What if the market is on a tear when the funds mature and you miss out on resulting gains?  Of course the reverse argument can be made.  I would rather keep a steady allocation of 80/20 or 90/10.  It's really not that big a deal to rebalance at years end if you are sticking to a handful of quality index funds.  I want those higher equity allocations during retirement as my planned retirement extends past 30 years. There has been a lot of recent research done which suggest that stock heavy portfolios are more successful for early/long term retirees.

Can always sell the "2050" fund in 2030 and buy into the "2080" fund - call it a bi-decadal rebalance.

There's also their LifeStrategy Growth fund, VASGX--maintains a static 80/20 allocation.

Bartleby_the_Scrivener

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Re: Thoughts on a target date fund?
« Reply #19 on: January 26, 2017, 08:51:55 PM »
Thanks for the thoughts, everyone.

It's slightly annoying to me that Vanguard doesn't offer some sort of simple button to rebalance a portfolio according to a set percentage for each fund. The only part of the target date fund that I don't like, actually, is the fees compared to the Admiral-class shares. They tend to be about ten basis points higher.

Metric Mouse

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Re: Thoughts on a target date fund?
« Reply #20 on: January 28, 2017, 12:05:19 AM »
Thanks for the thoughts, everyone.

It's slightly annoying to me that Vanguard doesn't offer some sort of simple button to rebalance a portfolio according to a set percentage for each fund. The only part of the target date fund that I don't like, actually, is the fees compared to the Admiral-class shares. They tend to be about ten basis points higher.

Are you suggesting that they should have a way to rebalance each persons individual portfolio based on individual metrics, even when that individual is diversified across several funds? And not charge more for it?

WallStreetPhysician

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Re: Thoughts on a target date fund?
« Reply #21 on: January 28, 2017, 03:55:54 AM »
I've been looking at VTTSX as the sole fund for an IRA. Any thoughts?

Excellent choice. I've posted about MOD EDIT: Spam link removed. three-fund vs. target-date funds on my blog, but I think in your case, a target-date fund is perfect.  As you get older and start contributing more, you can split it out into the three-fund portfolio using Admiral Shares to save some money on fees.
« Last Edit: March 22, 2017, 06:25:31 AM by arebelspy »

mathjak107

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Re: Thoughts on a target date fund?
« Reply #22 on: January 28, 2017, 04:50:51 AM »
VTTSX is Vanguard's 2060 Target Retirement Fund:

https://personal.vanguard.com/us/funds/snapshot?FundId=1691&FundIntExt=INT

For what it's worth, I absolutely love target retirement funds.

Last summer, in fact, I wrote an ebook (which got some nice reviews from other financial writers but was a total commercial flop)... but my idea was to see if one could create a really short, boilerplate retirement plan that would produce great results in just about any situation... that book (which wasn't about FIRE but was about FI) argued that cheap target retirement funds are tough to beat over any long haul and keep things super-clean.

Here's that plan, which I called the thirteen word retirement plan:

$5,500 annually into an IRA or 401(k) invested in cheap target retirement funds

P.S. Full disclosure: I don't myself use target retirement fund because I'd already done my retirement savings by the time they become available. But I've recommended them to my kids and to my parents.


i  don't like target funds at all . i think they are a bad attempt at one size fits all .

i rather see those who don't know what to do just buy a balanced fund .

target date funds load you up on investments based on time instead of what is happening around you and what part of the cycle an asset is in with no regard for your own risk tolerance.


not only do they not take risk tolerance in to the equation there is no standard format for what a fund should hold. it varys from fund family to fund family.


keep in mind there is noooooooooo standard as to how risky a target date should be even if you are at retirement . never use the words safe when you talk target funds.

the same 2010 target date fund from wells fargo in 2008-2009 lost 11.5% while the t.rowe price 2010 target fund lost 26.5%. that is a target fund that had 2 years to go before retirement. in fact the t.rowe target date fund didn't fall to below 45% equities until 5 years after the target date.

to make things worse after the downfall instead of buying more equities over the next 5 years as good investing tactics would dictate target funds actually shed their holdings further as they reduced down by design the equity side and sold while they really should be buying.

of course they replaced those equities with one of  the most dangerous investment today for a retiree which is bonds. with no where else to go but up more likely than down going forward  these retiree bond heavy portfolios are just waiting to send panic to those retirees who thought they were doing the conservative thing.

they are quite poor for dollar cost averaging in to . because markets are up 2/3's of the time and down only 1/3 you are buying fewer and fewer shares as time goes on coupled with them reducing equities as part of their plan. the end result is your own performance will lag the funds intention over time.

any method of investing that uses age or age to an event with disregard for the persons own pucker factor and what is happening in the world around them you can bet will not end well.

my vote is for retirement investing stay away from target funds , concentrate on a portfolio of funds where you have control over what to shed and what to keep as the big picture changes.


if you have a very long time frame like most here do dollar cost averaging in to a balanced fund would be likely a better choice than dollar cost averaging in to a declining glide path in to a market that rises over time  that will likly leave you much more conservative than the plan dictates . .
« Last Edit: January 28, 2017, 04:59:32 AM by mathjak107 »

boarder42

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Re: Thoughts on a target date fund?
« Reply #23 on: January 28, 2017, 05:06:39 AM »
I'm against them BC they typically have higher expense ratios than the underlying funds. It's not hard to make your own. They also auto adjust to more conservative investments which I don't like.

mathjak107

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Re: Thoughts on a target date fund?
« Reply #24 on: January 28, 2017, 08:54:12 AM »
they get even more conservative when you dollar cost in vs lump sum .