Target fund replacement with access to Admiral shares

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dcfas
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Target fund replacement with access to Admiral shares

Post by dcfas » Fri Nov 10, 2017 1:52 pm

Hello,
With the new changes to 403(b) accounts and the Newport Group I have been considering buying a fund(s) that offer Admiral shares. I presently have VTHRX and like the allocation as it is right now, as well as its simplicity. I was hoping folks could suggest an alternative fund(s) with similar qualities in Admiral shares. I have thought about the Wellington fund as well as holding the four funds in the VTHRX basket. Thoughts?
Thank you in advance,
Dcfas

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CABob
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Re: Target fund replacement with access to Admiral shares

Post by CABob » Fri Nov 10, 2017 2:12 pm

Holding the four funds that are currently in the target retirement fund would be good if you want an exact replacement. Wellington would be a change in philosophy in that you would be changing from index funds to a managed fund. Not a bad idea but a significant change.
Bob

dcfas
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Re: Target fund replacement with access to Admiral shares

Post by dcfas » Fri Nov 10, 2017 2:22 pm

CABob, Thanks. Yes, that is a very good point. I may have to stop trying to persuade folks to get out of their managed funds. The four funds would have me reallocating each year. I realize for many this is no big deal, but I haven’t had to do this yet.

venkman
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Re: Target fund replacement with access to Admiral shares

Post by venkman » Fri Nov 10, 2017 11:15 pm

dcfas wrote:
Fri Nov 10, 2017 1:52 pm
Hello,
With the new changes to 403(b) accounts and the Newport Group I have been considering buying a fund(s) that offer Admiral shares. I presently have VTHRX and like the allocation as it is right now, as well as its simplicity. I was hoping folks could suggest an alternative fund(s) with similar qualities in Admiral shares. I have thought about the Wellington fund as well as holding the four funds in the VTHRX basket. Thoughts?
The ER for Wellington Admiral shares is .16, which is .01 more than VTHRX.

If your main reason for moving to Admiral shares is to save on ER, the way to go is to hold each of the VTHRX funds individually. You trade lower costs for more complexity.

dcfas
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Re: Target fund replacement with access to Admiral shares

Post by dcfas » Sat Nov 11, 2017 9:40 am

venkman wrote:
Fri Nov 10, 2017 11:15 pm
dcfas wrote:
Fri Nov 10, 2017 1:52 pm
Hello,
With the new changes to 403(b) accounts and the Newport Group I have been considering buying a fund(s) that offer Admiral shares. I presently have VTHRX and like the allocation as it is right now, as well as its simplicity. I was hoping folks could suggest an alternative fund(s) with similar qualities in Admiral shares. I have thought about the Wellington fund as well as holding the four funds in the VTHRX basket. Thoughts?
The ER for Wellington Admiral shares is .16, which is .01 more than VTHRX.

If your main reason for moving to Admiral shares is to save on ER, the way to go is to hold each of the VTHRX funds individually. You trade lower costs for more complexity.
The fees have changed with the move from Vanguard to Newport Group. They will now charge $5 bucks a month per fund. See viewtopic.php?t=223355
Unless I’m misunderstanding this, the move to Admiral Shares in Wellington would save me money while keeping things very simple. Not sure this is correct- thank you for your thoughts!

feehater
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Re: Target fund replacement with access to Admiral shares

Post by feehater » Sat Nov 11, 2017 2:01 pm

No, it's now $5/month regardless of whether you have 1 fund or 50. So you could replicate the target date fund with its four component funds and save .05% or whatever.

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badbreath
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Re: Target fund replacement with access to Admiral shares

Post by badbreath » Sat Nov 11, 2017 5:25 pm

I like this fund from Vanguard


Target Retirement 2030 Trust Plus .06 ER
“While money can’t buy happiness, it certainly lets you choose your own form of misery.” Groucho Marx

dcfas
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Re: Target fund replacement with access to Admiral shares

Post by dcfas » Sat Nov 11, 2017 6:59 pm

feehater wrote:
Sat Nov 11, 2017 2:01 pm
No, it's now $5/month regardless of whether you have 1 fund or 50. So you could replicate the target date fund with its four component funds and save .05% or whatever.
I see that you posted your concern about the changes some time ago in the above link I posted. As I look up the costs for the four component funds of the target date fund, it appears that they add up to .32% for the Admiral shares. Is this correct? I guess I’ll just have to pay the 60 bucks and stick with what I have. Just trying to fully understand this. I doubt they will ever offer the Admiral shares in the target funds. - Thanks again for any suggestions.
DC

dcfas
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Re: Target fund replacement with access to Admiral shares

Post by dcfas » Sat Nov 11, 2017 7:01 pm

badbreath wrote:
Sat Nov 11, 2017 5:25 pm
I like this fund from Vanguard


Target Retirement 2030 Trust Plus .06 ER
Is this available to all? Wow.

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CABob
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Re: Target fund replacement with access to Admiral shares

Post by CABob » Sat Nov 11, 2017 9:15 pm

dcfas wrote:
Sat Nov 11, 2017 6:59 pm
As I look up the costs for the four component funds of the target date fund, it appears that they add up to .32% for the Admiral shares. Is this correct? I guess I’ll just have to pay the 60 bucks and stick with what I have.
I think you have miscalculated the ER. You cannot just add the ERs of the components. Instead you must take the prorated ER of each fund depending on the portion that the individual fund comprises. The overall ER of the four funds would be about .07
Bob

rkhusky
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Re: Target fund replacement with access to Admiral shares

Post by rkhusky » Sat Nov 11, 2017 9:37 pm

CABob wrote:
Sat Nov 11, 2017 9:15 pm
dcfas wrote:
Sat Nov 11, 2017 6:59 pm
As I look up the costs for the four component funds of the target date fund, it appears that they add up to .32% for the Admiral shares. Is this correct? I guess I’ll just have to pay the 60 bucks and stick with what I have.
I think you have miscalculated the ER. You cannot just add the ERs of the components. Instead you must take the prorated ER of each fund depending on the portion that the individual fund comprises. The overall ER of the four funds would be about .07
Which would save you about $100/year for each $100K in your portfolio. Some would call that a bargain to have Vanguard handle all rebalancing and glide path adjustments.

dcfas
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Re: Target fund replacement with access to Admiral shares

Post by dcfas » Sun Nov 12, 2017 10:29 am

Thank you for that info. So we would save several hundred dollars a year by switching to the Admiral shares of the four funds rather than keeping them in the target fund. If so, we would lose the auto balancing and glide path.

The Wellington fund is balanced. Does this mean I wouldn’t have to rebalance? And it seems much more expensive as it is actively managed. I’m leaning to just keep the four total funds in Admiral shares, outside of the target basket, unless Wellington is not much more expensive. Although it is an entirely different fund, it has much of what I already have, it seems, in stocks, bonds, and some international exposure. In addition, it seems to be very highly regarded in everything I have read. I confess I am a novice although I have read a decent amount of literature on personal investing and realized long ago that I wanted to be with non-actively managed indexes rather than the actively managed, costly funds my former “adviser” once sold me. I have been with Vanguard for about ten years now, and my wife switched over about five years ago. So, Wellington would be a new ball game for me. Decisions, decisions, lol.
Thanks again!

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