https://personal.vanguard.com/us/insigh ... hannel=MFNVanguard wrote: Vanguard announced it will increase the international equity and fixed income allocations for Vanguard Target Retirement Funds and Vanguard LifeStrategy® Funds to offer investors enhanced global diversification.
Increased global diversification
The international equity allocation for both types of funds will increase from 30% to 40% of equity exposure, and the international fixed income allocation will rise from 20% to 30% of nominal fixed income exposure.
International exposure provides valuable diversification benefits. Vanguard evaluated a number of factors, including worldwide market cap, home bias, costs and others, in determining the right mix of U.S. and international stocks and bonds.
The overall strategic asset allocation and glide path (the rate at which the funds' allocation becomes more conservative as each fund approaches its target date) for Target Retirement Funds won't change. In addition, the expense ratios of the Target Retirement Funds, ranging from 0.16% to 0.18%, aren't expected to change. The asset allocation changes are expected to be completed by year-end.
International increase in Target Retirement & LifeStrategy
International increase in Target Retirement & LifeStrategy
Re: International increase in Target Retirement & LifeStrate
Ha, *just* saw that.
Well, I guess at least they didn't add a new fund to the mix.
Well, I guess at least they didn't add a new fund to the mix.
Re: International increase in Target Retirement & LifeStrate
Oh dear. Here we go again....
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Re: International increase in Target Retirement & LifeStrate
Any chance this will lower expense ratios for the international funds?
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Re: International increase in Target Retirement & LifeStrate
Well if there is any truth in the study linked in this post - viewtopic.php?f=10&t=159480&newpost=2393540 - it might be a good thing after all, long term.
If we disagree, I guess we'll have to break our investments in to the component parts and go on from there - buy, hold and rebalance.
If we disagree, I guess we'll have to break our investments in to the component parts and go on from there - buy, hold and rebalance.
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
Re: International increase in Target Retirement & LifeStrate
I don't like it, I am in TR2020 with this change my expose to international stocks will increase by 5.5% to 23.5% and my US exposure to stocks will reduce by 5.5% to 36.5%. It might be time to change plans and move 3-fund portfolio.
Re: International increase in Target Retirement & LifeStrate
I guess Vanguard read Rick Ferri's blog post - viewtopic.php?f=10&t=154400
Re: International increase in Target Retirement & LifeStrate
Interesting article from Mr. Ferri, thanks for the link. In this case, I will hold my judgment until I read more about this subject on this site. I am sure there will be a lot more comments.JamesSFO wrote:I guess Vanguard read Rick Ferri's blog post - viewtopic.php?f=10&t=154400
Re: International increase in Target Retirement & LifeStrate
Interesting. While I'm an advocate of an international allocation, I was not particularly a fan of Mr. Ferri's blog article and I'm not sure I'm a fan of this. As far as I can tell, the rationale provided is as follows:
This is not exactly new information. It does not speak to what necessarily changed. Is this some form of tactical asset allocation (which by the way is excatly what Mr. Ferri proposes, with a dose of market timing waiting for some soveriegn shoe to drop)? Or is there some other explanation? I see the above as some carefully sculpted text designed to sound good and tell you absolutely nothing.International exposure provides valuable diversification benefits. Vanguard evaluated a number of factors, including worldwide market cap, home bias, costs and others, in determining the right mix of U.S. and international stocks and bonds.
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Re: International increase in Target Retirement & LifeStrate
Very interesting. Generally, Vanguard doesn't make such moves arbitrarily. It's a bit closer to a "world neutral" position, then, isn't it?
Re: International increase in Target Retirement & LifeStrate
I don't like it. Vanguard keeps changing its advice and they seem to be trend following. This strikes me as damaging to long-term returns as who is to say they won't keep changing at the wrong time, hurting returns. There seems to be little basis for these changes apart from valuations have changed. Their own research paper says 30% international is the sweet spot, but 20-40% is ok. What has changed? Stay the course!
Now, I don't think these changes will make a big difference either way. I hold Life Strategy Moderate as a couple of holdings for small accounts and will keep it that way as long as they keep the stock/bond split the same.
Now, I don't think these changes will make a big difference either way. I hold Life Strategy Moderate as a couple of holdings for small accounts and will keep it that way as long as they keep the stock/bond split the same.
Last edited by wjo on Thu Feb 26, 2015 12:58 pm, edited 1 time in total.
Re: International increase in Target Retirement & LifeStrate
This move actually makes the appropriate dated Target Retirement fund for me very close to the asset allocation I came up with several years ago and have been sticking to.
If I were starting out at Vanguard now, I'd probably just do the TR fund. However, with my workplace account money at Fidelity and only my Roth at Vanguard, I'll stay put with what I have.
If I were starting out at Vanguard now, I'd probably just do the TR fund. However, with my workplace account money at Fidelity and only my Roth at Vanguard, I'll stay put with what I have.
Re: International increase in Target Retirement & LifeStrate
It has only been months since Vanguard determined that 20% of bonds was the best number for the international bond fund. What has changed in less than a year?
Re: International increase in Target Retirement & LifeStrate
I think I'll stick with my current allocation of 1/3 international and 2/3 domestic. With zero international bonds. Having said that, I do think increasing the international bonds allocation makes sense. It always seemed like a waste of time having such a small percentage of the target retirement funds in international bonds. More than half of Vanguard Target retirement funds had less then 5% in international bonds which basically means it made no difference if it was there or not. If you are going to go with an asset, you might as well make it matter. If that makes any sense.
Re: International increase in Target Retirement & LifeStrate
This is a link to an article that discusses the changes in ER and international allocation for institutional investors. https://institutional.vanguard.com/VGAp ... info022615
As a side note I was pleased after opening an email today that announced my DC plan will be switching from the Vanguard Target Funds to Vanguard Target Trust. ER will drop from 18 bps to 8.25 bps.
As a side note I was pleased after opening an email today that announced my DC plan will be switching from the Vanguard Target Funds to Vanguard Target Trust. ER will drop from 18 bps to 8.25 bps.
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Re: International increase in Target Retirement & LifeStrate
Shrug. I guess I'm just as glad I don't use these funds as that's starting to get outside my personal comfort zone.
I do tend to think that Vanguard should be embarrassed to present these as funds you are expected to plan on using for a lifetime (there's no point in the glide slope if you aren't planning to stay in the fund long enough for the allocation to change much), when they can't stick to their own plan for more than a few years.
Let's see: the Target Retirement funds were introduced in late 2003, so they are less than twelve years old, and they've made changes
--in 2003 when they launched the funds,
--in 2006 when they goosed up the stock allocation,
--when they goosed up the international stock allocation,
--when they added international bonds,
--and now, they are goosing up both the international stock and bond allocation.
So that is five different fund compositions in twelve years. They themselves call this one a "strategic change" and all the others were bigger, so it is fair to call that five different strategies in twelve years.
It has stuck to each of its strategies for an average of less than three years.
Is a "strategy" a strategy if it's only good for three years? Sounds more like a "tactic" to me.
I do tend to think that Vanguard should be embarrassed to present these as funds you are expected to plan on using for a lifetime (there's no point in the glide slope if you aren't planning to stay in the fund long enough for the allocation to change much), when they can't stick to their own plan for more than a few years.
Let's see: the Target Retirement funds were introduced in late 2003, so they are less than twelve years old, and they've made changes
--in 2003 when they launched the funds,
--in 2006 when they goosed up the stock allocation,
--when they goosed up the international stock allocation,
--when they added international bonds,
--and now, they are goosing up both the international stock and bond allocation.
So that is five different fund compositions in twelve years. They themselves call this one a "strategic change" and all the others were bigger, so it is fair to call that five different strategies in twelve years.
It has stuck to each of its strategies for an average of less than three years.
Is a "strategy" a strategy if it's only good for three years? Sounds more like a "tactic" to me.
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Re: International increase in Target Retirement & LifeStrate
Yes. Makes me wonder if the long-term plan is to replace the individual components with Total World. Vanguard did something similar some years ago when it replaced the region-specific international funds with Total International.fortyofforty wrote:It's a bit closer to a "world neutral" position, then, isn't it?
Re: International increase in Target Retirement & LifeStrate
This is why I use such funds as a guide and use my own mix of funds. It is a bit discouraging that even Vanguard cannot "stay the course." I have actually been more consistent in my own investment approach than Vanguard has in their Target Retirement and LifeStrategy Funds.nisiprius wrote:Shrug. I guess I'm just as glad I don't use these funds as that's starting to get outside my personal comfort zone.
I do tend to think that Vanguard should be embarrassed to present these as funds you are expected to plan on using for a lifetime (there's no point in the glide slope if you aren't planning to stay in the fund long enough for the allocation to change much), when they can't stick to their own plan for more than a few years.
Let's see: the Target Retirement funds were introduced in late 2003, so they are less than twelve years old, and they've made changes
--in 2003 when they launched the funds,
--in 2006 when they goosed up the stock allocation,
--when they goosed up the international stock allocation,
--when they added international bonds,
--and now, they are goosing up both the international stock and bond allocation.
So that is five different fund compositions in twelve years. They themselves call this one a "strategic change" and all the others were bigger, so it is fair to call that five different strategies in twelve years.
It has stuck to each of its strategies for an average of less than three years.
Is a "strategy" a strategy if it's only good for three years? Sounds more like a "tactic" to me.
Another factor is that Vanguard might be trying to take advantage of valuations. International stocks are cheaper than US Stocks right now but perhaps with more risk.
A fool and his money are good for business.
Re: International increase in Target Retirement & LifeStrate
Thanks for that link; it leads me to the following which are even more interesting:Lax67 wrote:This is a link to an article that discusses the changes in ER and international allocation for institutional investors. https://institutional.vanguard.com/VGAp ... info022615
As a side note I was pleased after opening an email today that announced my DC plan will be switching from the Vanguard Target Funds to Vanguard Target Trust. ER will drop from 18 bps to 8.25 bps.
https://institutional.vanguard.com/VGAp ... info022615
https://institutional.vanguard.com/VGAp ... fo022615QA`
Essentially Vanguard is launching new institutional target date funds. Expenses are expected to be ~10 basis points. It'll do that by investing in different share classes of the underlying funds. More details at the links.
Re: International increase in Target Retirement & LifeStrate
My takeaways:
1) Do not rely on the current allocations if you are trying to set your own targets.
2) Vanguard is moving on a path towards global market weightings, assuming this can be achieved in a low-cost manner.
3) The allocations are not off the beaten path, and just "different" than before, with no appreciable increase in risk.
1) Do not rely on the current allocations if you are trying to set your own targets.
2) Vanguard is moving on a path towards global market weightings, assuming this can be achieved in a low-cost manner.
3) The allocations are not off the beaten path, and just "different" than before, with no appreciable increase in risk.
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Re: International increase in Target Retirement & LifeStrate
I agree with nedsaid that at least part of the reason for this shift is relative valuations particularly in US versus INTL equity markets. The US has been in an exuberant 5+ year bull market and US stocks are generously priced on a fundamental basis relative to DM and especially EM. The increased risk in international markets that is obvious and is fully priced into current valuations in my opinion. It's best to recall that when markets are priced to perfection, when risk is perceived to be lowest, that is often the point of maximal risk although it not perceived as such except in retrospect. So it was in the tech bubble and the real estate bubble. Obvious risk gets priced into current valuations (INTL) as does the tide of optimism after a long bull market run (US). No one knows when the trend in recent years of US outperformance will reverse but one thing that markets are very good is surprising us. Not only Vanguard, but also Bernstein, Ferri, Swedroe, Asness, Soros, Grantham, Shiller and others have written that we may be near such an inflection point and hence are tactically positioning their portfolios with that in mind. It is not a secret that some international market are on sale. I see no problem with this shift and in fact I did so with my portfolio months ago.
Vanguard doesn't admit that this had anything to do with their recent decision, that would look like market timing, but like Bogle himself, they may in fact from time to time do tactical asset allocation shifts in response to changes in the market. One thing that I, a skeptic, believe in is that valuations matter and paying attention to them usually pays off in the long run. Apparently a lot of people agree on that point.
Garland Whizzer
Vanguard doesn't admit that this had anything to do with their recent decision, that would look like market timing, but like Bogle himself, they may in fact from time to time do tactical asset allocation shifts in response to changes in the market. One thing that I, a skeptic, believe in is that valuations matter and paying attention to them usually pays off in the long run. Apparently a lot of people agree on that point.
Garland Whizzer
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Re: International increase in Target Retirement & LifeStrate
And, for those Target Retirement funds which contain TIPS, Vanguard originally used its intermediate-term fund but more recently substituted the short-term version.nisiprius wrote:Let's see: the Target Retirement funds were introduced in late 2003, so they are less than twelve years old, and they've made changes
--in 2003 when they launched the funds,
--in 2006 when they goosed up the stock allocation,
--when they goosed up the international stock allocation,
--when they added international bonds,
--and now, they are goosing up both the international stock and bond allocation.
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Re: International increase in Target Retirement & LifeStrate
My quick take is that Vanguard has a size problem. A passive whale with biases is going to distort the markets for which it is biased. I would not be surprised if in the future the weighted average of Vanguard’s all in one funds approaches the global bond / stock portfolio.
So my reaction is the same as it was when they introduced international bonds. This is good news for everybody in the passive investing space, whether they invest in these all in one funds or not. The result is more efficient markets. The more big players adopt a global portfolio, the less going global matters for individuals like me.
Then again, maybe I have a distorted view of just how big and ambitious Vanguard actually is.
So my reaction is the same as it was when they introduced international bonds. This is good news for everybody in the passive investing space, whether they invest in these all in one funds or not. The result is more efficient markets. The more big players adopt a global portfolio, the less going global matters for individuals like me.
Then again, maybe I have a distorted view of just how big and ambitious Vanguard actually is.
Re: International increase in Target Retirement & LifeStrate
all these are good reasons for asset rebalancing, but changing the asset allocation because of this seems like market timing. Also being invested in a Target fund with all the current changes that Vanguard has made (and Planning to do) to these funds, it feels more like being in a Managed fund with index portfolio than pure index investing.garlandwhizzer wrote:I agree with nedsaid that at least part of the reason for this shift is relative valuations particularly in US versus INTL equity markets. The US has been in an exuberant 5+ year bull market and US stocks are generously priced on a fundamental basis relative to DM and especially EM. The increased risk in international markets that is obvious and is fully priced into current valuations in my opinion. It's best to recall that when markets are priced to perfection, when risk is perceived to be lowest, that is often the point of maximal risk although it not perceived as such except in retrospect. So it was in the tech bubble and the real estate bubble. Obvious risk gets priced into current valuations (INTL) as does the tide of optimism after a long bull market run (US). No one knows when the trend in recent years of US outperformance will reverse but one thing that markets are very good is surprising us. Not only Vanguard, but also Bernstein, Ferri, Swedroe, Asness, Soros, Grantham, Shiller and others have written that we may be near such an inflection point and hence are tactically positioning their portfolios with that in mind. It is not a secret that some international market are on sale. I see no problem with this shift and in fact I did so with my portfolio months ago.
Vanguard doesn't admit that this had anything to do with their recent decision, that would look like market timing, but like Bogle himself, they may in fact from time to time do tactical asset allocation shifts in response to changes in the market. One thing that I, a skeptic, believe in is that valuations matter and paying attention to them usually pays off in the long run. Apparently a lot of people agree on that point.
Garland Whizzer
Last edited by parsi1 on Thu Feb 26, 2015 1:09 pm, edited 1 time in total.
Re: International increase in Target Retirement & LifeStrate
Many non-Bogleheads will see the move as exactly what they want: ongoing investment decisions made by an experienced portfolio management team.nisiprius wrote:I do tend to think that Vanguard should be embarrassed to present these as funds you are expected to plan on using for a lifetime (there's no point in the glide slope if you aren't planning to stay in the fund long enough for the allocation to change much), when they can't stick to their own plan for more than a few years.
Re: International increase in Target Retirement & LifeStrate
Eeek. I don't quite like this and would much prefer it if Vanguard stopped mucking with the funds on a regular basis. This is a ding to my willingness to recommend LifeStrategy in particular in the future.
For those accusing VG of market timing -- bear in mind that while the foreign stock increase might look good due to valuations (if you're into that type of thing), the exact opposite is true of international bonds, where yield is fully half of where it was when the international bond love affair started. Although for some reason we keep talking about international bonds as if they're in the same place vs our familiar bonds, they really aren't and IMHO they're a lousy purchase right now. Anyway, it's pretty clear to me that VG is doing this with a view on the long term, which would be great if these views on the long term were a little more long lasting themselves.
For those accusing VG of market timing -- bear in mind that while the foreign stock increase might look good due to valuations (if you're into that type of thing), the exact opposite is true of international bonds, where yield is fully half of where it was when the international bond love affair started. Although for some reason we keep talking about international bonds as if they're in the same place vs our familiar bonds, they really aren't and IMHO they're a lousy purchase right now. Anyway, it's pretty clear to me that VG is doing this with a view on the long term, which would be great if these views on the long term were a little more long lasting themselves.
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Re: International increase in Target Retirement & LifeStrate
Is anyone planning on leaving these funds due to this?
“If you think nobody cares if you're alive, try missing a couple of car payments.” – Earl Wilson
Re: International increase in Target Retirement & LifeStrate
Possibly - I have loved the idea of these funds but the changing (not this particular change especially but in totality) makes this more difficult to stay the course - because your course changes every three to four years!pennstater2005 wrote:Is anyone planning on leaving these funds due to this?
The fact that the ER gets even lower for those with access to VG associated retirement accounts is a big plus, however and thus am still thinking about this.
Re: International increase in Target Retirement & LifeStrate
I don't invest in these funds (though I would recommend them to someone who wants simplicity), and my domestic/global split is 50/50. Nevertheless, I don't like it simply because it seems that they are always tinkering.
Retirement investing is a marathon.
Re: International increase in Target Retirement & LifeStrate
I don't see this as "tinkering". On the press release, they basically said that a huge driver for this change was the lowering costs of doing international investing. It doesn't strike me as market timing at all. Think of it this way:
If the total international stock index fund had an expense ratio of 1%, would you hold as much of it as you do now? Or any of it at all? What if it was 0.5%? 0.2%? 0.1%? The lower that expense ratio goes, the more of it I believe you'd be willing to hold. That is, up to the actual target for international allocation that you'd like if costs were irrelevant.
So my take is that Vanguard would have liked to have had world neutral allocations all along if cost wasn't a concern. But the benefit from going from 30% international to 50% international in diversification was outweighed by the additional costs it would have. Over the last 12 years, international investing (in both stocks and bonds) has become more efficient and Vanguard now believes they can run their international operations at lower cost than before. So now they can bring things closer to actual global weighting that they really wanted the whole time.
I don't see that as tinkering or failing to "stay the course". I see that as taking advantage of lower expenses.
If the total international stock index fund had an expense ratio of 1%, would you hold as much of it as you do now? Or any of it at all? What if it was 0.5%? 0.2%? 0.1%? The lower that expense ratio goes, the more of it I believe you'd be willing to hold. That is, up to the actual target for international allocation that you'd like if costs were irrelevant.
So my take is that Vanguard would have liked to have had world neutral allocations all along if cost wasn't a concern. But the benefit from going from 30% international to 50% international in diversification was outweighed by the additional costs it would have. Over the last 12 years, international investing (in both stocks and bonds) has become more efficient and Vanguard now believes they can run their international operations at lower cost than before. So now they can bring things closer to actual global weighting that they really wanted the whole time.
I don't see that as tinkering or failing to "stay the course". I see that as taking advantage of lower expenses.
Re: International increase in Target Retirement & LifeStrate
I thought about that already, and my answer is "No". If this had been the AA two years ago when I signed up, I still would have done so.pennstater2005 wrote:Is anyone planning on leaving these funds due to this?
For those who don't like this, and hold the funds in taxable accounts, this could be a big issue.
I think it is "tinkering". Vanguard and other companies are promising Target Retirement Funds 40 years into the future, but they dink with the basics of the funds every couple of years?
L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")
Re: International increase in Target Retirement & LifeStrate
I suppose this is one way to look at it.toto238 wrote:So now they can bring things closer to actual global weighting that they really wanted the whole time.
I don't see that as tinkering or failing to "stay the course". I see that as taking advantage of lower expenses.
We know that Vanguard has stated in 2 white papers over the past several years that the international "effect"(my term, not theirs) seems to get going pretty good at 20% of stock and that it tapers off above 40% of stock. What we don't know is what happens between 20% and 40%. For example, is 40% "better" than 30%?
When they put their Target and LifeStrategy funds at 30%, we may have assumed it was more of a sweet spot of effectiveness rather than a sweet spot of effectiveness combined with cost effectiveness.
Of course, we'll never really know the complete motivation. And I don't like the fact that changes happen to these funds this often.
In general, I trust Vanguard not to be leading people down the primrose path. However, it would suit me just fine if there are no more changes for quite awhile.
Link to Asking Portfolio Questions
Re: International increase in Target Retirement & LifeStrate
On foreign bonds the foreign bond component VTIBX is currency hedged, an idea I don't agree with*. And now that will be a bit less negligible in Life Strategy Growth at 6% rather than 4% of the whole fund. The foreign stock change is more important if it goes from around ~24>~31% of the fund, which I agree with. So on net the change is positive IMO. I do see the issue of too much frequent 'strategic' changes undermining confidence though.
*I think foreign high grade bonds are a plausible diversifier against over concentration in the credit of the US govt in the long run, but a sharp deterioration in perception of that credit would probably be accompanied by a much weak dollar, so you're negating that aspect of the diversification by currency hedging. Foreign stocks OTOH have a loose correlation to currency values generally and are unlikely to do well in a USD/US govt credit crisis. In normal times, the noise of currency fluctuation in foreign bonds adds volatility so the % can't be too high, but IMO currency hedging at least partly defeats the main purpose of having such an allocation at all. I'm sure Vang would defend this on the usual basis of 'risk' being defined as annual std deviation of return and the currency hedge reduces the vol in normal times. And VTIBX has done notably better than broad unhedged foreign bond ETF's lately (up 7% in past yr v down 7% for IGOV for example, though the bond composition of those also differs a bit). But IMO 'deep risk' is the reason to have foreign bonds, not optimizing year to year noise, so it would be a fairly small % and not currency hedged.
*I think foreign high grade bonds are a plausible diversifier against over concentration in the credit of the US govt in the long run, but a sharp deterioration in perception of that credit would probably be accompanied by a much weak dollar, so you're negating that aspect of the diversification by currency hedging. Foreign stocks OTOH have a loose correlation to currency values generally and are unlikely to do well in a USD/US govt credit crisis. In normal times, the noise of currency fluctuation in foreign bonds adds volatility so the % can't be too high, but IMO currency hedging at least partly defeats the main purpose of having such an allocation at all. I'm sure Vang would defend this on the usual basis of 'risk' being defined as annual std deviation of return and the currency hedge reduces the vol in normal times. And VTIBX has done notably better than broad unhedged foreign bond ETF's lately (up 7% in past yr v down 7% for IGOV for example, though the bond composition of those also differs a bit). But IMO 'deep risk' is the reason to have foreign bonds, not optimizing year to year noise, so it would be a fairly small % and not currency hedged.
Re: International increase in Target Retirement & LifeStrate
We are using LS conservative, which is 11.8% international. That will increase to 15.7%. Not too much to get excited about. International bond goes from 12.1% to 18% I'm not sure of the rationale behind this change because Vanguard's own study shows optimal international range from 20-40%, so they took the middle. This should remind all in the value of studies for recommendations. Or maybe they did it just to irk Mr. B. And maybe they upped international bond because U.S. bond interest rates have been too low. I hope that's not the reason, and I hope the reason for upping international equity was not from expectations or forecasting.
Since we are all wishing, I'll wish that Vanguard drops the year in the title of TR funds. I'll wish that the highest equity allocation is 80%. I'll wish that the glide path is modified.
Look for these modifications coming soon to a portfolio near you.
Paul
Since we are all wishing, I'll wish that Vanguard drops the year in the title of TR funds. I'll wish that the highest equity allocation is 80%. I'll wish that the glide path is modified.
Look for these modifications coming soon to a portfolio near you.
Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Re: Vanguard Strikes Back With Lower Target-Date Fees
[Posts merged into here, see below. --admin LadyGeek]
Welcome news, but I find Vanguard's tendency to alter its Target Retirement Funds' asset allocations disturbing:Mel Lindauer wrote:New institutional funds to cost 10 basis points; firm also boosts international stake of multiasset offerings.
http://news.morningstar.com/articlenet/ ... ?id=686660
I'm not saying the changes are necessarily bad, but I really wish Vanguard would "stay the course."In addition to creating a new, lower-cost series, Vanguard will be making a change to the strategic allocation of its multiasset lineup. By the end of 2015, the funds will boost their international-stock stake to 40% of stocks from 30%, and they will increase their international-bond exposure to 30% of the bond sleeve from 20%.
Re: Vanguard Strikes Back With Lower Target-Date Fees
If I had $100M to invest, I don't think I would be very worried about fees eating through my savings and affecting my ability to retire at age X rather than Y. I could retire today and my family would be well off for generations.
Re: Vanguard Strikes Back With Lower Target-Date Fees
That makes two of us.Ken Schwartz wrote:I'm not saying the changes are necessarily bad, but I really wish Vanguard would "stay the course."In addition to creating a new, lower-cost series, Vanguard will be making a change to the strategic allocation of its multiasset lineup. By the end of 2015, the funds will boost their international-stock stake to 40% of stocks from 30%, and they will increase their international-bond exposure to 30% of the bond sleeve from 20%.
Re: Vanguard Strikes Back With Lower Target-Date Fees
On that note, Vanguard is also changing the international equity allocations. Interesting perspective, as that info is last in Morningstar's article but first here: In rare move, Vanguard beefs up international exposure in target date funds
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Re: Vanguard Strikes Back With Lower Target-Date Fees
VG must be listening to RickKen Schwartz wrote:By the end of 2015, the funds will boost their international-stock stake to 40% of stocks from 30%"
The TDs are moving closer to my AA. Maybe I should consider them...although no telling when they'll drift away again.
Re: International increase in Target Retirement & LifeStrate
For comparison, can someone look into how often other target funds change fundamental aspects of themselves?
One example I find is John Hancock:
http://www.jhinvestments.com/Fund/Port ... Type=Price
Not only do they have more than 40 different funds in their target-date fund, but they issue a new list of holdings EVERY MONTH. Literally, they change course once per month.
And we complain that Vanguard uses 4 funds and makes a very minor change once every 3 years or so.
One example I find is John Hancock:
http://www.jhinvestments.com/Fund/Port ... Type=Price
Not only do they have more than 40 different funds in their target-date fund, but they issue a new list of holdings EVERY MONTH. Literally, they change course once per month.
And we complain that Vanguard uses 4 funds and makes a very minor change once every 3 years or so.
Re: International increase in Target Retirement & LifeStrate
Here's another example:
https://www.jpmorganfunds.com/cm/Satell ... =4812A3841
20+ funds in it. You can bet your bottom dollar they're rebalancing things pretty often.
https://www.jpmorganfunds.com/cm/Satell ... =4812A3841
20+ funds in it. You can bet your bottom dollar they're rebalancing things pretty often.
Re: International increase in Target Retirement & LifeStrate
I don't see it as a big deal. Most who post here - for example - would never invest in one of these funds (for a variety of reasons).
Those who do choose a LS or Target Date fund have made the conscious decision to turn over their investments to the experts at Vanguard, either because of simplicity, lack of confidence/knowledge or just not wanting to be bothered with keeping track of things. If this move really does bother some, they can pretty easily break out into a three fund portfolio and go on their merry way.
Those who do choose a LS or Target Date fund have made the conscious decision to turn over their investments to the experts at Vanguard, either because of simplicity, lack of confidence/knowledge or just not wanting to be bothered with keeping track of things. If this move really does bother some, they can pretty easily break out into a three fund portfolio and go on their merry way.
Re: Vanguard Strikes Back With Lower Target-Date Fees
Maybe you should just send Vanguard a bill for using your ideas. (Rick doesn't need the money.)DVMResident wrote:VG must be listening to RickKen Schwartz wrote:By the end of 2015, the funds will boost their international-stock stake to 40% of stocks from 30%"
The TDs are moving closer to my AA. Maybe I should consider them...although no telling when they'll drift away again.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
Re: Vanguard Strikes Back With Lower Target-Date Fees
I would like to know how they came up with the new percentages. Since these are not total world market percentages, presumably they went through an analysis to get to the new percentages.
I do see that if you look at the box in figure 3 shown in the paper at https://institutional.vanguard.com/iwe/ ... 112006.pdf
the new 40% is just below the far right edge (max int'l %) wherein you get the diversification benefit (the white box in the graphic). But the volatility doesn't start going back up until about 50% (based on just eyeing up the graph).
I have been thinking of increasing my International exposure recently too. Hopefully my reasons are different than Vanguard's, because I am pretty much just market timing it. I'm currently at 30% of total equity. I have been tracking the Target Retirement 2025, which is the year I'll turn 65. But I don't use their target retirement fund. I just track it using their other funds, and keep my bonds all short-term and domestic. I was thinking about making a small increase in international (one to three percent), since it's cheap right now and may be bottoming (speculation on my part).
Now I feel I may be justified in bumping my international up to 40% of equity just to keep tracking my chosen target date fund. And in looking at Vanguard's web site, I see that these changes have already taken place.
Well, now I'm wondering if they've put some upward pressure on international stocks with this shift. Probably I'm thinking too hard.
Maybe I should just stay the course, but really, since I was following the 2025 target date retirement fund, it looks like my course has shifted.
Kalo
I do see that if you look at the box in figure 3 shown in the paper at https://institutional.vanguard.com/iwe/ ... 112006.pdf
the new 40% is just below the far right edge (max int'l %) wherein you get the diversification benefit (the white box in the graphic). But the volatility doesn't start going back up until about 50% (based on just eyeing up the graph).
I have been thinking of increasing my International exposure recently too. Hopefully my reasons are different than Vanguard's, because I am pretty much just market timing it. I'm currently at 30% of total equity. I have been tracking the Target Retirement 2025, which is the year I'll turn 65. But I don't use their target retirement fund. I just track it using their other funds, and keep my bonds all short-term and domestic. I was thinking about making a small increase in international (one to three percent), since it's cheap right now and may be bottoming (speculation on my part).
Now I feel I may be justified in bumping my international up to 40% of equity just to keep tracking my chosen target date fund. And in looking at Vanguard's web site, I see that these changes have already taken place.
Well, now I'm wondering if they've put some upward pressure on international stocks with this shift. Probably I'm thinking too hard.
Maybe I should just stay the course, but really, since I was following the 2025 target date retirement fund, it looks like my course has shifted.
Kalo
"When people say they have a high risk tolerance, what they really mean is that they are willing to make a lot of money." -- Ben Stein/Phil DeMuth - The Little Book of Bullet Proof Investing.
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Re: International increase in Target Retirement & LifeStrate
I am not Warren Buffett, and I have not recommended the Vanguard S&P 500 index fund for my spouse should I perish. I have, instead, recommended one of the LifeStrategy funds. They have always offered a "one stop shop" for diversification in stocks and bonds, and this move does nothing to change that. I am not a fan of Target Retirement anything, liking to have more control over the asset mix. So, this changes the asset mix slightly, but I am more concerned about the relatively high expense ratios of the LS funds, and about the fact that they own fewer (thousands fewer) stocks than a combination of Total U.S. and Total International stock funds. I hope, when all is said and done, that Vanguard lowers the expense ratios as a result of this, since it seems small investors are being overcharged for not being able to invest in the four or five funds needed to match the funds in the LS series.
Re: International increase in Target Retirement & LifeStrate
Thanks for Morningstar and Investment News to combine 2 separate topics in one news article. Here's the Investment News release: In rare move, Vanguard beefs up international exposure in target date funds (posted earlier).
We have two on-going threads, I moved a few posts around. Those wishing to discuss the international equity reallocation, post here.
Lower Target-Date fees (institutional only, BTW) post here: Vanguard Strikes Back With Lower Target-Date Fees
We'll have to update all the wiki pages again.
We have two on-going threads, I moved a few posts around. Those wishing to discuss the international equity reallocation, post here.
Lower Target-Date fees (institutional only, BTW) post here: Vanguard Strikes Back With Lower Target-Date Fees
We'll have to update all the wiki pages again.
- pennstater2005
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Re: International increase in Target Retirement & LifeStrate
To answer my own question, I will be doing nothing for now.pennstater2005 wrote:Is anyone planning on leaving these funds due to this?
“If you think nobody cares if you're alive, try missing a couple of car payments.” – Earl Wilson
Re: International increase in Target Retirement & LifeStrate
Ahem. Have you looked at the yields lately, of international bonds vs Treasuries? That can't be the reason.pkcrafter wrote:And maybe they upped international bond because U.S. bond interest rates have been too low. I hope that's not the reason, and I hope the reason for upping international equity was not from expectations or forecasting.
We hold Vanguard to a different standard. LifeStrategy already has a black mark on its record because of past changes and needs some stability. I don't want to be explaining 5 years from now why yet again LifeStrategy underperformed Wellesley, this time because international bonds underperformed the way they were almost certain to do, but rest assured the fund doesn't have too many international bonds going forward and it's gone back to a more reasonable composition. This is what I currently say vs the Asset Allocation record, and I don't like it.toto238 wrote: Not only do they have more than 40 different funds in their target-date fund, but they issue a new list of holdings EVERY MONTH. Literally, they change course once per month.
And we complain that Vanguard uses 4 funds and makes a very minor change once every 3 years or so.
- stevewolfe
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Re: International increase in Target Retirement & LifeStrate
And this is why I don't use these funds sad to say. I want to make the decision when these changes are made. Seems like there is fiddling going on every few years... Pass.
Re: International increase in Target Retirement & LifeStrate
I love the term "enhances."
In my view, it's s l o w active management.
Oh, wait. It's based on RE search as in "RE consider."
Now where have I heard that before?!
"Passive" my ....ive.
Lev
In my view, it's s l o w active management.
Oh, wait. It's based on RE search as in "RE consider."
Now where have I heard that before?!
"Passive" my ....ive.
Lev