In the discussion of adding international bonds to Vanguard Target Retirement Funds and Vanguard Life Strategy Funds an additional change was mentioned for the Target Retirement Funds.
Vanguard Target Retirement Funds will undergo a few additional changes. Vanguard Short-Term Inflation-Protected Securities Index Fund will replace Vanguard Inflation-Protected Securities Fund.
If an important consideration is to protect from an unexpected increase in interest rates, it appears to me that the 2.5 year duration for the Short-Term Inflation-Protected Securities Index versus the 8.3 year duration for the Inflation-Protected Securities Fund is a major consideration for anticipating possible unexpected rising interest rates. Does this make sense to anyone else?
If the normal consideration of protecting from an unexpected increase in inflation is the motive, I believe both funds offer similar inflation protection. Is this correct?
Another benefit of the short term fund is that it is an index fund thus avoiding manager risk.
The expense rations are similar: VTAPX has an ER of .10% while VAIPX has an ER of .11%. Since the short term fund is an index fund the minimum investment is $10,000 while the minimum investment in the inflation-protected fund is $50,000.
One drawback to the short term fund is a .25% purchase fee which I hope may be removed around the time the International Bond Index Fund becomes available and I reallocate to more closely match the Retirment Income Fund.
Since I'm almost 73 years old, I more or less copy the Retirement Income Fund allocations. The new Retirement Income Fund allocations according to the Wiki are:
Total Bond Index Fund 39.2%
Total Internation Bond Index Fund 14%
Short-Term Inflation-Protected Bond Index Fund 16.8%
Total Stock Index Fund (approximately) 20%
Total International Stock Index Fund (approximately) 10%
Last edited by artthomp
on Thu Feb 07, 2013 5:33 pm, edited 1 time in total.