The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: reformingSucka on December 08, 2017, 04:59:54 PM
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Hello savvy MMM investors!
I am new to this investing thing. Although I have been in the market for awhile (through retirement funds), I have been pretty hands off about it by putting all my money into "Target Retirement Date Funds". I got wiser a couple years ago (pre-MMM) and put all my money into the furthest target fund available - which currently is 2060. I plan to retire much earlier than that.
So the vanguard 2060 is 90% stocks and 10% bonds - and the total market is 100% stocks. The comparison chart from Vanguard is below. My question is: should I switch to index fund over target date fund? I don't really understand what all these number mean...
https://personal.vanguard.com/us/funds/vanguard/compare?navigatingFrom=2
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As an only fund, the 2060 fund is in my opinion easily the best choice of the two, and a pretty good choice in any case. The 2060 fund invests in international companies and bonds in addition to all US stocks, which makes it less risky especially if you kight use the money within the next 10 years.
The time you would spend learning how incorporate a total stock market fund into a good allocation would not necessarily be worth the effort.
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As an only fund, the 2060 fund is in my opinion easily the best choice of the two, and a pretty good choice in any case.
+1
No way to know beforehand which will do better, but the 2060 fund is a very reasonable choice.
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Thank you both! I had spent sometime trying to understand the comparisons and realized I was out of my depth. 2060 it is.
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At. 0.16% expense ratio, you get quite a lot for your money.
Could you improve on it after spending years of study here and at bogleheads?
Sure, but only if you're really set on DIY. I had not realized the extent of international holdings until just now.
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I dunno, I prefer a more hands-on approach, at least for now. Also, it looks like the 2060 fund invests in Investor class funds, not Admiral class, so you have higher fees built in than if you hand-rolled.
You could always just buy the Admiral versions of those same funds in those same proportions and pay a lot less, then adjust annually. But that's if, as MarkBike says, you want to do the deep dive into learning all the ins and outs yourself. Personally, I enjoy that stuff, though I've still got a long way to go. Although, seriously, you wouldn't need to educate yourself much just to match what the 2060 fund is already doing, and pay lower fees as long as you've got at least $10k in each fund. *shrug*
If you want to just set it & forget it, and you're comfortable with how those timed funds adjust over time, then this seems like a good option.
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...match what the 2060 fund is already doing, and pay lower fees as long as you've got at least $10k in each fund.
See Vanguard's fee for auto-rebalancing and adjusting your glide path over time is .07% (https://forum.mrmoneymustache.com/investor-alley/wealthmentbetterfront-nail-in-the-coffin-article/msg739765/#msg739765) for discussion along those lines.
If the 0.07% is still applicable, that is $70/yr for a $100K portfolio. Some will want to DIY and save the $70, others will consider the $70 well spent.
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...match what the 2060 fund is already doing, and pay lower fees as long as you've got at least $10k in each fund.
See Vanguard's fee for auto-rebalancing and adjusting your glide path over time is .07% (https://forum.mrmoneymustache.com/investor-alley/wealthmentbetterfront-nail-in-the-coffin-article/msg739765/#msg739765) for discussion along those lines.
If the 0.07% is still applicable, that is $70/yr for a $100K portfolio. Some will want to DIY and save the $70, others will consider the $70 well spent.
Good link, MDM. Yeah, as the portfolio grows, the fees grow proportionally, which is why I like to hand-roll and go exclusively with Admiral funds, to keep the ER (expense ratio) down as low as possible. That .07% would be $700 annually for a $1M portfolio.
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Not directly relevant to this discussion, but I wanted to add the disclaimer that this discussion about target date funds being a good deal is specific to Vanguard.
I did the same math using the target date funds in my employer's retirement plan (which is also managed by a reasonably reputable company) and they were charging me $370 per $100k per year over the weighted expense ratios of their component funds, which I could also buy directly in the same retirement plan (and the expense ratio of the component funds are already significantly higher than comparable Vanguard funds).
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All great info, thanks everyone! I think the 2060 vanguard is good for now. This analysis is for my IRA.
and Maizeman - thank you for the clairication. yes - this is applicable for vanguard which has great ER. I too have an employer run retirement plan and I need to go dig into what it’s ER is.