Investing in only 3 target funds just seems.... strange.

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aIIan
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Joined: Mon Apr 27, 2015 10:21 pm

Investing in only 3 target funds just seems.... strange.

Post by aIIan »

Currently maxing out my Roth 401(K) and maxing out two Roth IRA's for the wife and I.

For simplicity's sake I've been steadily investing the 401(k) 100% in Prudential's Bright Horizon 2045 Fund and the IRA's are 100% in Vanguard's VTIVX.

I can't explain it but to be so heavily invested in target type funds seems odd, more specifically the two Vanguard accounts even though I know that in theory they're just one big account separated into two different names.

Been toying around with the idea of exchanging *my* VTIVX for something a little more aggressive just to switch things up.

This is something I wrestle with every January and have easily been able to talk myself out of switching things up until now.

Am I over(under) analyzing this or what?
Jack FFR1846
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Re: Investing in only 3 target funds just seems.... strange.

Post by Jack FFR1846 »

Just to switch things up?

Investing isn't about switching things up. That's playing games and will cost you money. Decide an AA, buy low cost, diversified index funds. And if you need to do something, rebalance on your birthday.
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Topic Author
aIIan
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Re: Investing in only 3 target funds just seems.... strange.

Post by aIIan »

You're right.

I guess I've just always wondered if 10% in bonds isn't a little high for my presumed risk/reward ratio.
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Watty
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Re: Investing in only 3 target funds just seems.... strange.

Post by Watty »

Investing in only 3 target funds just seems.... strange.
Yes, three funds would seem strange to me.

I have almost all mine in just one target date fund. :oops:
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fortfun
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Re: Investing in only 3 target funds just seems.... strange.

Post by fortfun »

Don't look for the needle, buy the haystack.
JB
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leeks
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Re: Investing in only 3 target funds just seems.... strange.

Post by leeks »

Leave it as is.
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bluquark
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Re: Investing in only 3 target funds just seems.... strange.

Post by bluquark »

If you want, you can switch out to Vanguard Total World Stock Index Fund, which is basically the stock portion of your Target Date.

I also have this tendency to second-guess my AA constantly within a small range (the attractive zone for me is from 60 to 75), but there's no right answer and a 10% difference in AA won't make or break your retirement either way. I think the reason it bothers me is because I feel "forced" by the stay-the-course advice to stick to a random decision in the past that I made with less thought, and that feels wrong. Anyway, if some very mild tinkering satisfies you on this, do it, it's whatever.
70/30 portfolio | Equity: global market weight | Bonds: 20% long-term munis - 10% LEMB
Nummerkins
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Re: Investing in only 3 target funds just seems.... strange.

Post by Nummerkins »

Nothing wrong with that. My wife's 401k is 100% in a Vanguard target fund. My Roth/Rollerover IRAs are all Total Market US. Before that I used a LifeStrategy fund. I've found that doing this gives me less reason to possibly tinker. It just goes and goes.
Today's high is tomorrow's low.
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stemikger
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Re: Investing in only 3 target funds just seems.... strange.

Post by stemikger »

Always choose simplicity. Jack has taught this his entire life, don't let him down. He devoted his life up until his last days with his message so all our lives could be easier not harder when it comes to investing.

I for one might be one of those who took it to the extreme, but it is what keeps me staying the course. I have my entire portfolio in one fund. The Vanguard Balanced Index Fund. Jack also loved this fund and he directly answered my question at the second to last BH meeting. He said nothing is wrong with having everything in that fund. That's all I needed to hear to stay the course.

When it comes to investing, complexity is not the answer.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!
AlohaJoe
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Re: Investing in only 3 target funds just seems.... strange.

Post by AlohaJoe »

aIIan wrote: Tue Jan 22, 2019 10:25 pm I can't explain it but to be so heavily invested in target type funds seems odd,

Am I over(under) analyzing this or what?
It doesn't seem like you've analysed it at all, since you can't explain it and are just going based on "feelings".

Anyway, the Vanguard fund clearly has 4 funds. So you already own more than 3 funds, for whatever that's worth.
DB2
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Re: Investing in only 3 target funds just seems.... strange.

Post by DB2 »

I would go on Youtube and watch some of Jack Bogle's interviews and discussions. Very enlightening. I did this just recently which led me to this forum.
Grt2bOutdoors
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Re: Investing in only 3 target funds just seems.... strange.

Post by Grt2bOutdoors »

OP - By more aggressive, does that mean exchanging monies from one of the three target funds which currently holds over 10,000 individual securities and is lower cost to a fund that holds considerably less in individual securities and may charge more?

I'll leave you with two quotes by a very wise man, John Bogle: "The two greatest enemies of the equity fund investor are expenses and emotions".
"When there are multiple solutions to a problem, choose the simplest one".

^^These quotes are from John Bogle's Little Book of Common Sense Investing. Highly recommend you read that book if you have not already done so.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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bluquark
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Re: Investing in only 3 target funds just seems.... strange.

Post by bluquark »

Total World is a single holding, not any more complicated or less diversified than a Target Date fund. OP said they wanted less bonds. It’s possible to do that without any additional complexity. And since it’s tax-advantaged, there’s no cost to making changes either.

The advice on this board can be inflexibly attached to starting strategy sometimes, and taken too far, the imperative to “stay the course” can lead to unnecessary stress in itself. Not every change is a failure of investment discipline, and a little bit of tinkering is no big deal. This doesn’t sound like a reaction to past performance (except perhaps the recent market volatility made the OP conclude that their risk tolerance is higher than thought, which can be a good reason to make changes).

I’m not saying OP should make a change. I just think it’s marginal and doesn’t matter either way.
70/30 portfolio | Equity: global market weight | Bonds: 20% long-term munis - 10% LEMB
Silence Dogood
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Re: Investing in only 3 target funds just seems.... strange.

Post by Silence Dogood »

bluquark wrote: Tue Jan 22, 2019 11:56 pm Total World is a single holding, not any more complicated or less diversified than a Target Date fund. OP said they wanted less bonds. It’s possible to do that without any additional complexity. And since it’s tax-advantaged, there’s no cost to making changes either.

The advice on this board can be inflexibly attached to starting strategy sometimes, and taken too far, the imperative to “stay the course” can lead to unnecessary stress in itself. Not every change is a failure of investment discipline, and a little bit of tinkering is no big deal. This doesn’t sound like a reaction to past performance (except perhaps the recent market volatility made the OP conclude that their risk tolerance is higher than thought, which can be a good reason to make changes).

I’m not saying OP should make a change. I just think it’s marginal and doesn’t matter either way.
I know it may not matter too much to you or the OP, but for the sake of accuracy:

Total U.S. Stock Market and Total International (combined) hold 9,773 stocks. Total World holds 7,774.
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