Vanguard Roth IRA - Keep same fund or change?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
User avatar
Topic Author
JohnnyBeGood
Posts: 15
Joined: Fri Jan 30, 2015 10:10 pm

Vanguard Roth IRA - Keep same fund or change?

Post by JohnnyBeGood »

Hello,

I'm in my late 30s and few years back I've converted my 401k from my previous employer into Vanguard Roth IRA and at time time most likely who I talked when setting up account they suggested to invest in Vanguard STAR Fund (VGSTX) https://personal.vanguard.com/us/funds ... true#tab=0
Today I have just little over $17k. My goal from now on close to the deadline is to invest maximum of $5.5k for each previous year and today I've sent the rest for 2017 year. Throughout the year I'm investing $200 every month.
My question is should I stay with current fund or move all money into Vanguard Target Retirement 2045 Fund (VTIVX)
https://personal.vanguard.com/us/funds/ ... irect=true
?

When I compare them on Vanguard website they appear to have similar YTD although VTIVX appears to have slightly better performance. I understand that past performance does not mean anything in the future and that's why I'm confused what to do, leave it and forget about or make a change.
:sharebeer
I like to fill my tub up with water then turn the shower on and act like I'm in a submarine that's been hit.
User avatar
Alexa9
Posts: 1872
Joined: Tue Aug 30, 2016 9:41 am

Re: Vanguard Roth IRA - Keep same fund or change?

Post by Alexa9 »

That is an active fund. Not recommended here.
Target Date Funds are excellent. They use passive index funds, automatically rebalance and become more conservative as you get closer to retirement.
User avatar
FiveK
Posts: 15691
Joined: Sun Mar 16, 2014 2:43 pm

Re: Vanguard Roth IRA - Keep same fund or change?

Post by FiveK »

Depends on whether one thinks investing "60% in stocks and 40% in bonds...[with] exposure to eleven underlying actively managed Vanguard funds" or "in 4 Vanguard index funds, holding approximately 90% of assets in equities and 10% in bonds" is better.

No way to know in advance. Either is a defensible choice.

Do you have an overall asset allocation target, and if so how does this piece fit?
User avatar
David Jay
Posts: 14569
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Vanguard Roth IRA - Keep same fund or change?

Post by David Jay »

The Star fund has a good history so the discussion is between good and (perhaps) better. No bad choice here.

I prefer a portfolio with more diversification than the Star fund. I would choose one of the All-in-One funds that includes both Total US and Total International stock funds: TargetRetirement or LifeStrategy. The difference between these two families are that TR funds follow a “glideslope” asset allocation that changes over time. The LS funds hold the AA that you pick and do not change. As a control freak, I want to set my asset allocation and not have some fund manager adjust it over time.

The other thing to consider is that there is no penalty to move between funds in a Roth, so this does not have to be a “forever” decision.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
User avatar
goingup
Posts: 4901
Joined: Tue Jan 26, 2010 12:02 pm

Re: Vanguard Roth IRA - Keep same fund or change?

Post by goingup »

STAR fund is a 60/40 sensible "starter" fund that has a higher expense ratio than other similar funds. ER=.32

Life Strategy Moderate Growth is also 60/40, composed of index funds and has an ER=.13.

Target 2045 has more equity and is 90/10, with 54% domestic/36% International equity. ER=.15.

The most important decision for you in choosing a fund, is what stock/bond ratio to choose. The ER is important, but the cost difference on your balance between STAR and TR2045 is $29 per year.
TropikThunder
Posts: 3909
Joined: Sun Apr 03, 2016 5:41 pm

Re: Vanguard Roth IRA - Keep same fund or change?

Post by TropikThunder »

JohnnyBeGood wrote: Wed Feb 21, 2018 6:07 pm Hello,

I'm in my late 30s and few years back I've converted my 401k from my previous employer into Vanguard Roth IRA and at time time most likely who I talked when setting up account they suggested to invest in Vanguard STAR Fund (VGSTX) https://personal.vanguard.com/us/funds ... true#tab=0
Today I have just little over $17k. My goal from now on close to the deadline is to invest maximum of $5.5k for each previous year and today I've sent the rest for 2017 year. Throughout the year I'm investing $200 every month.
My question is should I stay with current fund or move all money into Vanguard Target Retirement 2045 Fund (VTIVX)
https://personal.vanguard.com/us/funds/ ... irect=true
?

When I compare them on Vanguard website they appear to have similar YTD although VTIVX appears to have slightly better performance. I understand that past performance does not mean anything in the future and that's why I'm confused what to do, leave it and forget about or make a change.
:sharebeer
The single biggest advantage for the STAR Fund (VGSTX) is it's $1,000 minimum opening balance, compared to most passive Vanguard funds' $3,000 minimum. As others have pointed out, there are likely better choices (VGSTX is more expensive than Vanguard index funds and more conservative than most people in their 30's want) but it's not a bad fund. My personal preference is a higher stock allocation than the STAR fund's 60/40 but that's a decision every investor must make for themselves. As a homework assignment (I used to teach ;)) you should compare the portfolio makeup of the two funds and see if you can explain why one may have better YTD performance than the other. If you can't see a reason, than you have to leave the money where it is. :beer

What's that saying about "teach a man to fish"?
User avatar
Topic Author
JohnnyBeGood
Posts: 15
Joined: Fri Jan 30, 2015 10:10 pm

Re: Vanguard Roth IRA - Keep same fund or change?

Post by JohnnyBeGood »

Thanks guys for your replies! It definitely gave me some good info and it will help me in deciding what to do.
I like to fill my tub up with water then turn the shower on and act like I'm in a submarine that's been hit.
Post Reply