I’m thinking about moving my IRA from a broad based equity index to the Vanguard 2050 Target Retirement Fund. As of right now, the fund is 90% equities (including 15% international and 5% emerging markets) and about 10% bonds. Once 2026 hits, the fund starts progressively allocation more funds to fixed income. By the time 2050 rolls around, they are suppose to be almost entirely in income producing securities. What are people’s opinions on this? If anything, it will allow me to simply pump money into this fund and not worry about rebalancing or shifting asset allocations as time passes.
sorry…for a lack of better words, they are gay and they don’t do what they are advertised to do.
Ladies and gentlemen: Greed, for lack of a better word, is good. Wall Street 2: Money Never Sleeps, hits theaters soon. Has the potential to be the worst sequel ever.
Pros: -Super cheap (esp from Vanguard) and cost effective way of allocating an entire portfolio -Ultra efficient - you save time on debating one fund vs another, rebalancing, etc -Will almost always do better as a “tracking” portfolio than a single investors attempts to pick/neglect sectors or asset classes, esp. over the long-term Cons: -Other than the year you’re retiring, you have zero say on your own retirement portfolio [unless you use the target date fund as a core holding with satellite positions] -Wildly different variations between fund companies on how a portfolio for the same aged person should look -Literally guaranteed to underperform the market due to the [small] expense ratios and abstaining from active management -EXTREMELY UNSEXY WAY TO MANAGE YOUR ACCOUNT. I put this in caps because seriously, don’t neglect it. If you work in finance - especially active asset management - and you have your retirement in a target date fund, expect people to raise eyebrows and wonder why you don’t “trust yourself” to run your money actively. I think a lot of people - especially industry people - associate passive management with being uninformed, lazy, or both. My advice would be, if you think you’re not gonna truthfully and realistically attempt to allocate, diversify, and rebalance your portfolio, then do it. I’ve personally used them and been happy [not blown away, but happy] with results when I chose to use them. EDIT: Original poster, check your prospectus re: majority is in income producing securities at retirement. Or go to: https://personal.vanguard.com/us/funds/vanguard/TargetRetirementList#targetAnchor Almost all fund companies shoot for a balanced (50/50) portfolio at age 65. The idea is not that you retire and immediately need 100% of your portfolio in income. Most folks at age 60-65 are shooting for equal parts participation and protection in their portfolios - one piece to give income, and another to outpace inflation/grow.
Well I’m considering it just for my Roth IRA which is only about 40% of my total at risk capital. I plan to keep the Roth passively invested anyways, and those would require a lot less management than even index investing. Besides, they keep a very updated asset allocation listing. If I ever wanted to increase my international exposure, or fixed income exposure, I could always sell 10% of my holdings in that fund and buy something else. I chase alpha in the other 60% of the my portfolio. My biggest problem in that is this damn test is taking up all the time I would like to be spending researching. So my active portfolio is sitting about 40% cash because I haven’t had the time to research any ideas.
if you are working with a smaller amount (<20k) it is my belief that it is a effiecient way to DCA into the fund.
job71188 Wrote: ------------------------------------------------------- > Well I’m considering it just for my Roth IRA which > is only about 40% of my total at risk capital. I > plan to keep the Roth passively invested anyways, > and those would require a lot less management than > even index investing. Besides, they keep a very > updated asset allocation listing. If I ever wanted > to increase my international exposure, or fixed > income exposure, I could always sell 10% of my > holdings in that fund and buy something else. > > I chase alpha in the other 60% of the my > portfolio. My biggest problem in that is this damn > test is taking up all the time I would like to be > spending researching. So my active portfolio is > sitting about 40% cash because I haven’t had the > time to research any ideas. Wouldn’t you be better off pursuing alpha and having higher turnover in a tax-qualified ROTH account versus an after-tax account?