VG Target Retirement Funds

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stemikger
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VG Target Retirement Funds

Post by stemikger » Fri Mar 18, 2011 6:52 pm

I took a look at my VG account today (I have a small IRA with VG) and I am not happy about the increase in international. When I bought this fund the international was much lower.

I truly don't feel comfortable with such a large international exposure with the VG Target Retirement Funds now that they have increased the percentage.

I also feel they are heavily weighted in stocks even with the Fund approaching 1 year before retirement (59% still in stocks).

The way I see it, it would make more sense investing in the VG Balanced Fund and not doing anything with it until a few years before Retirement and then go into Total Stock Market and Total Bond Market (2 funds) (a/k/a Scott Burns Couch Potato Portfolio) and readjust the AA to something more conservative (probably age in Bonds).

I feel very much like John Bogle and don't think international is necessary because of the exposure built into the U.S. markets. So would this make more sense to just go with the Balanced Fund or the two fund option.

Pacal
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Post by Pacal » Fri Mar 18, 2011 7:15 pm

Perhaps consider shifting to the Vanguard Target Retirement Income Fund (VTINX). It's 30 % stocks (9 % international), 65 % bonds, and 5 % short-term reserves. Would that be more in line with your comfort level?

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abuss368
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Post by abuss368 » Fri Mar 18, 2011 7:29 pm

Buy the three underlying funds with an allocation you are comfortable with and then Stay the Course....

norm
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Post by norm » Fri Mar 18, 2011 7:34 pm

Find the Target Retirment Fund that meets or comes closest to your desired AA. You can supplement the Target Fund with other funds that gives you the AA you want or you can also try to duplicate the Target Fund by buying the funds it owns to give you your planned AA.

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Random Musings
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Post by Random Musings » Fri Mar 18, 2011 8:11 pm

If you really want to be crazy, use the four fund approach - add TIPS to the bond side. Probably not a bad thing to do as you are approaching retirement. As Abuss368 has said, tailor the stock/bond allocation to your need of risk.

With respect to the equity portion that is int'l - I'd stick with the 30%. If, for example you would cut it to 20%, I don't think it will really affect your portfolio's expected returns/volatility in a meaningful way.

RM

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Cut-Throat
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Post by Cut-Throat » Fri Mar 18, 2011 8:22 pm

abuss368 wrote:Buy the three underlying funds with an allocation you are comfortable with and then Stay the Course....
I agree with this. Find the Asset Allocation that you want and then select the Target Fund that has this AA.

I like the Target Income Fund for retirement myself.

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joe8d
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Post by joe8d » Fri Mar 18, 2011 8:37 pm

Find the Asset Allocation that you want and then select the Target Fund that has this AA.
I disagree with that statement if the TR fund is in the dynamic portion of the glide Path (<25 away from the fund date).That fund will continue to change AA to the more conservative bond side as time progresses. Better to consider a TR fund on the basis of it's position on the Glide Path now and what it's AA will be in 5,10,15 etc.years into the future.
Last edited by joe8d on Sat Mar 19, 2011 9:15 pm, edited 1 time in total.
All the Best, | Joe

Tuxx
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Post by Tuxx » Fri Mar 18, 2011 9:44 pm

I don't like these Target Retirement funds.

One example: Target Retirement 2055 Fund this is 44 years from now.

And has a 10% allocation to bonds and 2% allocation to cash. Why?

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tsturbo
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Post by tsturbo » Fri Mar 18, 2011 10:42 pm

The VG TR funds are very straight forward. Three total market low cost index funds with a low ER, what is not to like? Look under the hood of other company TR funds and you will see what I mean. VG does it right IMO. 3fund portfolio from VG ROCKS!

shariron
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Post by shariron » Sat Mar 19, 2011 12:32 am

Just give me Admiral Shares and I'm sold on the TR funds. I know it's just a tiny little smidge more expensive then owning the underlying funds individually as Admiral shares, but that's the whole point of all this, right? Why pay more for something that will otherwise perform exactly the same?

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SSSS
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Post by SSSS » Sat Mar 19, 2011 5:41 am

Tuxx wrote:I don't like these Target Retirement funds.

One example: Target Retirement 2055 Fund this is 44 years from now.

And has a 10% allocation to bonds and 2% allocation to cash. Why?
The 10% bond makes sense for rebalancing.

The 2% cash isn't part of the formal asset allocation; all mutual funds have to maintain some cash on hand, though they keep it as low as they feasibly can.

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Cut-Throat
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Post by Cut-Throat » Sat Mar 19, 2011 7:28 am

joe8d wrote: Better to consider a TR fund on the basis of it's position on the Glide Path now
How is this different than what I said?

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MooseDad
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Post by MooseDad » Sat Mar 19, 2011 8:48 am

Cut-Throat wrote:
joe8d wrote: Better to consider a TR fund on the basis of it's position on the Glide Path now
How is this different than what I said?
There are two different components of target funds -- their stock/bond allocation now, and their glide path (how quickly they will change). You're talking about picking a fund based on its current AA and joe8d is talking about picking a fund based on its glide path.

The advice usually given here regarding target funds is to simply pick the fund that has the stock/bond ratio you want. For example, if you're 30 years old and want to hold "your age in bonds" you'd pick Target 2025 (26.5% bonds) or Target 2020 (33.5% bonds).

However, this advice ignores the glide path of the target funds. Picking a fund based only on its AA may put your farther out on the glide path than you'd like to be. Target 2025 will hold 50% bonds in 15 years; Target 2020 gets to 50% bonds in only 10 years. If this is what you want at age 30, selecting the target fund based on its bond allocation works for you. But if it is not, you need another strategy.

One option is to pick the fund with the glide path you want and supplement its bond allocation. A 30-year old could pick Target 2035 (11.25% bonds) and add money in a Total Bond Market fund to bring the total bond allocation up to 30%. But this adds additional complexity to your portfolio (one more fund) and may not work for some people.

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Taylor Larimore
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Target Fund glide path

Post by Taylor Larimore » Sat Mar 19, 2011 2:20 pm

Hi Stemiker:

I would not worry about the "glide path," assuming your Target Fund is in a tax-advantaged account. Anytime you feel your fund's glide path (stock/bond ratio) is unsatisfactory, simply exchange to another Target Fund with the stock/bond ratio you want. There should be no cost with Vanguard.
"Simplicity is the master key to financial success." -- Jack Bogle

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Opponent Process
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Post by Opponent Process » Sat Mar 19, 2011 2:34 pm

I would simply keep the TR fund and add as much TSM as needed to "dilute" the international from the overall portfolio. Since you'd also be diluting bonds as well, you'd have to use a more conservative TR fund.
30/30/20/20 | US/International/Bonds/TIPS | Average Age=37

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