Why I Chose Target Retirement Funds

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Dandy
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Joined: Sun Apr 25, 2010 7:42 pm

Re: Why I Chose Target Retirement Funds

Post by Dandy »

If the investor doesn't know or care about investing, it is unlikely that they would understand or intelligently select an appropriate allocation. Given that situation I think the advice is a whole lot better than most other things the investor is apt to do.

That may be true - but may not be. The risk of blindly taking or giving advice with relatives or with intentioned friends is probably more risky than with licensed professionals - and with know that has its own risk. There are much worse recommendations than a retirement dated Target Date fund - but there may be more suitable ones based on risk tolerance and other financial conditions. A better idea would be recommending a fee only financial advisor and joining the meeting with them. Having some understanding of what you have started investing in is quite important.

It could be a difficult Thanksgiving dinner down the road if/when the trusted investment recommendation takes a major hit and the owner doesn't understand the risks and need to stay the course. People won't blame themselves -- "he talked us into it" is the likely feeling. :oops:
mptness
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Re: Why I Chose Target Retirement Funds

Post by mptness »

Dandy wrote:The risk of blindly taking or giving advice with relatives or with intentioned friends is probably more risky than with licensed professionals - and with know that has its own risk. There are much worse recommendations than a retirement dated Target Date fund - but there may be more suitable ones based on risk tolerance and other financial conditions. A better idea would be recommending a fee only financial advisor and joining the meeting with them. Having some understanding of what you have started investing in is quite important.
My exception to the rule of not giving advice to relatives or friends is my children. As with livesoft, my adult kids are investing only in TR funds. They are also probably blindly taking my advice although I have told them the reasons for my recommendation. Hard to beat way of holding a low expense diversified portfolio when just beginning to save and invest for the future. At the present dollar value of their accounts, they are paying less in expenses than if they held three of the funds individually. However, when they have sufficient assets to hold admiral shares, I will encourage them to consider evaluating their investments, setting their own glide paths, and re-balancing themselves (if for no other reason than saving 10 basis points in expenses over a lifetime of investing). As for recommending a financial advisor...I'll send them to bogleheads.org
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assumer
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Re: Why I Chose Target Retirement Funds

Post by assumer »

StevieG72 wrote:I beg to differ on the expense ratio!

$40 a month IS a big deal and a $500,000 portfolio is not large enough to make $40 month insignificant.
You and I just may agree to disagree on that. With my lifestyle I'll easily throw $10 away on a drink at a bar once a week. $1.35 / day does NOT add up to anything significant in my life to me. I keep diligent track of my expenses and I can say with 100% confidence what matters and what doesn't for the bottom line in my life.
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abuss368
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Re: Why I Chose Target Retirement Funds

Post by abuss368 »

StevieG72 wrote:I beg to differ on the expense ratio!

$40 a month IS a big deal and a $500,000 portfolio is not large enough to make $40 month insignificant.

When I first started I owned target retirement funds but I jumped ship for lower fees and more personalization.

I laugh at the posts that claim they have more time to spend with family, friends, hobbies etc. because they are not managing their portfolio.

It does not take much time and I enjoy the satisfaction of doing it myself.
I have found that 3 - 6 funds is enough for us. Personally, my two favorite portfolio's are a) Three Fund Portfolio and Rick Ferri's "Core Four". The overall management and administration is very easy and does not take much time.

In the big picture, the time saver for us was leaving the evil stock picking world and returning to Vanguard's low cost index approach with a "buy and hold" and "stay the course" philosophy.
John C. Bogle: “Simplicity is the master key to financial success."
texasdiver
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Re: Why I Chose Target Retirement Funds

Post by texasdiver »

For many of us investing from within 403(b) or 401(k) plans there is often no savings to be had by going with individual funds rather than target date funds.

in my own case, I have a 403(b) invested directly with Vanguard and my wife has the same thing for one of her 403(b) accounts. In both cases Vanguard limits our investment options to Investor Shares regardless of the size of our accounts. Even if my account balance reaches 7 figures my 403(b) is still limited to investor shares which means that I pay exactly the same expense ratio with target retirement funds as I would by breaking it out to the individual funds.

Since I'm comfortable enough to live with the asset allocations derived by Vanguard and not smart enough to think I can do any better myself, I just keep those two accounts invested 100% in target retirement funds. Keeps things simple and reduces the need for rebalancing. If I ever leave this job I'm liable to transfer everything over to my TSP account where expense ratios are lower than anything else. Or else just leave the funds where they are as putting them into an IRA to achieve a slightly lower ER could jeopardize my ability to do backdoor Roth conversions.
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