Gviper wrote:Is there any advantages to the 3 fund portfolio vs. a Target Retirement fund that matched your desired allocation?
1. A three fund portfolio is more tax efficient if in a taxable account, at least if one has both taxable and tax deferred accounts. Even in a taxable account flexibility to tax loss harvest and drill down to specific tax lots of specific asset classes would be helpful.
2. A TR fund automatically follows a glide path. If one does not want that glide-path then it is an advantage to use separate funds. There are also life strategy funds that do not follow a glide path. The final step in TR, the Target Retirement Income Fund, does not continue to adjust the asset allocation.
3. Vanguard and other companies have shown a tendency to change the composition of the TR funds with little fanfare. That may be an advantage or it may be an advantage for the investor to have increased awareness by making any changes explicitly himself.
4. I think that an explicitly three (or any) fund portfolio is better for the investor to understand exactly what he has. To the extent TR funds are no-brainers, they are also thoughtless from the point of view of the investor. I am not sure that is a good thing.
5. Three fund portfolios may be slightly cheaper. I think there are some complaints about the lack of Admiral shares for TR funds. However, this is already in an area of diminishing benefit.
6. It is probably easier and more straightforward to vary the asset selection if an all in one fund is not the core fund. For example, one might prefer a larger position in TIPS in the bond allocation, or other choices (yes that gets away from the basic three fund concept). The counter argument is that being in a TR fund removes any temptation to try to be fancy.