Target Date Funds Changed again?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
User avatar
stemikger
Posts: 4914
Joined: Thu Apr 08, 2010 5:02 am

Target Date Funds Changed again?

Post by stemikger » Sun Mar 11, 2018 9:50 am

I just noticed the Target Date Funds once again changed their asset allocation. I only checked because my daughter is now in one of these funds through her 403b. I was kind of shocked to see they changed the Target Date Fund 2030 Fund from 65/35 stocks bonds to 75/25 stocks bonds and the 2025 Funds are not 65/35 stocks/bonds when they were previously 55/45.

It seems like Vanguard has a hard time staying the course with these funds. On the one hand I love how they only add what is needed, unlike other fund companies, but on the other hand, aren't they supposed to Stay the Course and stick with one strategy. I am also not a fan of foreign stocks and definitely not a fan of foreign bonds.

My daughter is only 23 and shows no sign of being very interested in investing right now, so I told her this was her best choice until she wants to get more involved. Yes, even though it has foreign holdings. ; )

Having said that, why can't Vanguard stick with one strategy when it comes to the AA and/or glide paths. That is why I'm such a fan of the tried and true balanced index, which sticks with 60/40 all the time with all U.S. It is the steady rock that doesn't change to be more popular. It does it's job without any drama and/or uncertainty. It is the friend who never lets you down and quietly is supportive when it sees you lost your way. It is the working man who goes to work every day and doesn't get much credit but is steady and strong through all the years of providing for his family. Yes, the Balanced Index Fund is the John Bogle of index mutual funds.

My apologies if this was discussed already, but I couldn't find it when I searched. What do you folks think of Vanguard changing these funds so often since inception.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

stan1
Posts: 5991
Joined: Mon Oct 08, 2007 4:35 pm

Re: Target Date Funds Changed again?

Post by stan1 » Sun Mar 11, 2018 9:57 am

stemikger wrote:
Sun Mar 11, 2018 9:50 am

My apologies if this was discussed already, but I couldn't find it when I searched. What do you folks think of Vanguard changing these funds so often since inception.
Unfortunately it's competition and marketing. A certain percentage of the population including some companies who choose 401K administrators will compare 1 year, 5 year, and 10 year performance of a Vanguard 2030 fund with a Fidelity 2030 Index fund (76% equities) and decide one is better than the other. Outside of our Bogleheads bubble there's enough of the population who doesn't understand that the performance is based on the chosen asset allocation.

H-Town
Posts: 1272
Joined: Sun Feb 26, 2017 2:08 pm

Re: Target Date Funds Changed again?

Post by H-Town » Sun Mar 11, 2018 10:07 am

The Target Date Fund is superior than balanced index fund in every way.

With that said, have you read the TD fund prospectus? Focus on goals, objectives, and its strategies. The tweak in its assets allocation is part of the strategies to help the fund achieve its goals.

peppers
Posts: 1342
Joined: Tue Oct 25, 2011 7:05 pm

Re: Target Date Funds Changed again?

Post by peppers » Sun Mar 11, 2018 10:11 am

Hi Stem

Vanguard likes to "tweak" its LS and TD funds. It's in their DNA.

At least they have not added factor or alt funds to the mix...........yet. :wink:
"..the cavalry ain't comin' kid, you're on your own..."

User avatar
jhfenton
Posts: 3329
Joined: Sat Feb 07, 2015 11:17 am
Location: Ohio

Re: Target Date Funds Changed again?

Post by jhfenton » Sun Mar 11, 2018 10:43 am

I'll challenge the original premise. I don't see any evidence that Vanguard has changed the TRF allocations (again).

Comparing the current allocations to the numbers from the Wiki from 2015:

TRF 2030 - 74.4/25.6 in December 2015, 69.6/29.5/0.9 (stock/bond+cash/other) now
TRF 2020 - 59.4/40.6 in December 2015, 53.8/45.2/1.0 now

That seems like they've glided down a few percent. They certainly haven't juiced them up as asserted.

User avatar
CyberBob
Posts: 3213
Joined: Tue Feb 20, 2007 2:53 pm

Re: Target Date Funds Changed again?

Post by CyberBob » Sun Mar 11, 2018 10:47 am

stemikger wrote:
Sun Mar 11, 2018 9:50 am
I just noticed the Target Date Funds once again changed their asset allocation. I only checked because my daughter is now in one of these funds through her 403b. I was kind of shocked to see they changed the Target Date Fund 2030 Fund from 65/35 stocks bonds to 75/25 stocks bonds...
Is her 403b reporting the numbers correctly?
According to Vanguard annual reports for Target Retirement 2030, there doesn't seem to be a change to the glide path, and it's never yet been 65/35, nor 75/25 since 2014/2015.

2014: 75.6 / 24.4
2015: 74.4 / 25.6
2016: 72.9 / 27.1
2017: 71.7 / 28.3
2018: 70.8 / 29.2 (Jan 31, latest reported number)

User avatar
BL
Posts: 8350
Joined: Sun Mar 01, 2009 2:28 pm

Re: Target Date Funds Changed again?

Post by BL » Sun Mar 11, 2018 10:55 am

The nearer years are into the glide path which speeds up until 7 years past the date, IIRC. The far-away dates don't move much at all for years. Just switch to a farther out date if you want less bonds. I prefer fixed Life Strategy but they are not usually found in 401ks, etc.

TwstdSista
Posts: 987
Joined: Thu Nov 16, 2017 4:03 am

Re: Target Date Funds Changed again?

Post by TwstdSista » Sun Mar 11, 2018 10:56 am

Vanguard Target Retirement 2030 Fund (VTHRX) is currently 70.77/29.23.

See: https://personal.vanguard.com/us/funds/ ... true#tab=2

User avatar
stemikger
Posts: 4914
Joined: Thu Apr 08, 2010 5:02 am

Re: Target Date Funds Changed again?

Post by stemikger » Sun Mar 11, 2018 2:49 pm

This is from the Vanguard site for the 2030 Summary
Summary
Vanguard Target Retirement Funds offer a diversified portfolio within a single fund that adjusts its underlying asset mix over time. The funds provide broad diversification while incrementally decreasing exposure to stocks and increasing exposure to bonds as each fund’s target retirement date approaches. The funds continue to adjust for approximately seven years after that date until their allocations match that of the Target Retirement Income Fund. Investors in the funds should be able to tolerate the risks that come from the volatility of the stock and bond markets. The 2030 fund invests in 4 Vanguard index funds, holding approximately 75% of assets in stocks and 25% in bonds. You may wish to consider this fund if you’re planning to retire between 2028 and 2032.
2025 Fund below:
Vanguard Target Retirement Funds offer a diversified portfolio within a single fund that adjusts its underlying asset mix over time. The funds provide broad diversification while incrementally decreasing exposure to stocks and increasing exposure to bonds as each fund’s target retirement date approaches. The funds continue to adjust for approximately seven years after that date until their allocations match that of the Target Retirement Income Fund. Investors in the funds should be able to tolerate the risks that come from the volatility of the stock and bond markets. The 2025 fund invests in 4 Vanguard index funds, holding approximately 65% of assets in stocks and 35% in bonds. You may wish to consider this fund if you’re planning to retire between 2023 and 2027.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

User avatar
triceratop
Moderator
Posts: 5720
Joined: Tue Aug 04, 2015 8:20 pm
Location: la la land

Re: Target Date Funds Changed again?

Post by triceratop » Sun Mar 11, 2018 3:00 pm

stemikger wrote:
Sun Mar 11, 2018 2:49 pm
This is from the Vanguard site for the 2030 Summary
Summary
Vanguard Target Retirement Funds offer a diversified portfolio within a single fund that adjusts its underlying asset mix over time. The funds provide broad diversification while incrementally decreasing exposure to stocks and increasing exposure to bonds as each fund’s target retirement date approaches. The funds continue to adjust for approximately seven years after that date until their allocations match that of the Target Retirement Income Fund. Investors in the funds should be able to tolerate the risks that come from the volatility of the stock and bond markets. The 2030 fund invests in 4 Vanguard index funds, holding approximately 75% of assets in stocks and 25% in bonds. You may wish to consider this fund if you’re planning to retire between 2028 and 2032.
2025 Fund below:
Vanguard Target Retirement Funds offer a diversified portfolio within a single fund that adjusts its underlying asset mix over time. The funds provide broad diversification while incrementally decreasing exposure to stocks and increasing exposure to bonds as each fund’s target retirement date approaches. The funds continue to adjust for approximately seven years after that date until their allocations match that of the Target Retirement Income Fund. Investors in the funds should be able to tolerate the risks that come from the volatility of the stock and bond markets. The 2025 fund invests in 4 Vanguard index funds, holding approximately 65% of assets in stocks and 35% in bonds. You may wish to consider this fund if you’re planning to retire between 2023 and 2027.
That may be the fund description but is not representative of what the funds actually hold. Look at the Portfolio composition tab, or the annual reports.

As for the question:
What do you folks think of Vanguard changing these funds so often since inception.
I don't, because they haven't (recently).
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

Dandy
Posts: 5405
Joined: Sun Apr 25, 2010 7:42 pm

Re: Target Date Funds Changed again?

Post by Dandy » Sun Mar 11, 2018 5:26 pm

I love the concept but have said many times it is like owning a slow motion active fund. Hopefully, VG shows more constraint about amping up the risk for the TD funds with nearer retirement dates.

Right now use Balanced Index, Wellesley Income and some fixed income to get the allocation/risk close to what I need.

rkhusky
Posts: 5711
Joined: Thu Aug 18, 2011 8:09 pm

Re: Target Date Funds Changed again?

Post by rkhusky » Sun Mar 11, 2018 7:48 pm

stemikger wrote:
Sun Mar 11, 2018 2:49 pm
This is from the Vanguard site for the 2030 Summary
Summary
Vanguard Target Retirement Funds offer a diversified portfolio within a single fund that adjusts its underlying asset mix over time. The funds provide broad diversification while incrementally decreasing exposure to stocks and increasing exposure to bonds as each fund’s target retirement date approaches. The funds continue to adjust for approximately seven years after that date until their allocations match that of the Target Retirement Income Fund. Investors in the funds should be able to tolerate the risks that come from the volatility of the stock and bond markets. The 2030 fund invests in 4 Vanguard index funds, holding approximately 75% of assets in stocks and 25% in bonds. You may wish to consider this fund if you’re planning to retire between 2028 and 2032.
Perhaps Vanguard is waiting until the AA reaches 70% before updating their web site? They're probably trying to save money by not having someone look at their website too frequently.

User avatar
Artsdoctor
Posts: 3563
Joined: Thu Jun 28, 2012 3:09 pm
Location: Los Angeles, CA

Re: Target Date Funds Changed again?

Post by Artsdoctor » Mon Mar 12, 2018 5:02 pm

This is going to be a perpetual issue with both Target Date funds and LIfeStrategy funds. Asset allocation may change and funds may be added at the discretion of Vanguard (or any other fund family using target date funds). In my opinion, this is why these funds should generally not be held in a taxable account. If they're going to be in a tax-advantaged account, you can sell/exchange them at any time if you feel they're not in keeping with your desired asset allocation. However, if they're in a taxable account, that might result in unwanted capital gains so you'll find yourself in a difficult spot. Here, you can always start with the Target Date fund of your choice in order to get your foot in the door and then make changes later in life as your situation changes and your balances hopefully balloon.

Post Reply