"The One Fund I Use to Invest for Retirement"

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
Topic Author
Taylor Larimore
Posts: 32839
Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

"The One Fund I Use to Invest for Retirement"

Post by Taylor Larimore »

Bogleheads:

Philip Taylor, CPA, maintains a no-nonsense blog that he calls PT Money. His latest article caught my eye. It is about Vanguard's Target Retirement 2040:

The One Fund I Use to Invest for Retirement – VFORX

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Ted Kan
Posts: 20
Joined: Tue Jan 17, 2012 9:39 pm

Re: "The One Fund I Use to Invest for Retirement"

Post by Ted Kan »

Thanks Taylor.
I'm considering simplyfying my retirement AA and a Target Retirement fund is one that I may use. Of course being retired I'd go with one with a larger bond allocation. Also considering Van. Wellsley and your three fund portfolio.
User avatar
Jay69
Posts: 1801
Joined: Thu Feb 17, 2011 8:42 pm

Re: "The One Fund I Use to Invest for Retirement"

Post by Jay69 »

Another single fund approach that Bogleheads may like could be the Vanguard LifeStrategy Funds.

If I was able to use one fund I would use of these myself.

Vanguard LifeStrategy Funds
"Out of clutter, find simplicity” Albert Einstein
BHChinook
Posts: 200
Joined: Mon Nov 26, 2007 11:44 am
Location: East Texas

Re: "The One Fund I Use to Invest for Retirement"

Post by BHChinook »

I'm going to blow the horn again for VTINX. It has the same index fund components as VFORX but it adds TIPS. Also, I do not like funds that adjust AA with age. I understand that risks associated with equities actually increase with holding time. If this is true, the whole idea that more bonds are needed as a person ages is called into question. Everyone should pick the AA they are comfortable with and not rely on the moods of a Vanguard management team.

Now, if Vanguard would just grant VTINX admiralty status...
It's always easier to do nothing than to do something.
Tom_T
Posts: 4824
Joined: Wed Aug 29, 2007 2:33 pm

Re: "The One Fund I Use to Invest for Retirement"

Post by Tom_T »

I hadn't realized that the Target funds included TIPS at the very end. Some people might want a little more, a little sooner, so maybe a combination of a Target fund + a desired TIPS allocation would do.

Target 2020: 35% TBM
Target 2015: 40% TBM, 3.5% TIPS
Target 2010: 41% TBM, 12.5% TIPS, 1.2% money market

Edited to add: or VTINX, as was just suggested:

45% TBM
20% TIPS
20% TSM
9% TI
5% money market
User avatar
ObliviousInvestor
Posts: 4212
Joined: Tue Mar 17, 2009 9:32 am
Contact:

Re: "The One Fund I Use to Invest for Retirement"

Post by ObliviousInvestor »

Personally, I've become quite taken with the one-fund approach. (Though I'd do things differently if some of my retirement savings were in taxable accounts.)

On a tangential note: I got the chance to meet Phil Taylor (the author of the article) in person last year. Very nice guy. He's the person behind the Financial Blogger Conference.
Mike Piper | Roth is a name, not an acronym. If you type ROTH, you're just yelling about retirement accounts.
User avatar
momar
Posts: 1359
Joined: Sun Nov 13, 2011 11:51 am

Re: "The One Fund I Use to Invest for Retirement"

Post by momar »

Someday, when Congress passes the law abolishing separate IRA and 401k/403b/457 accounts and allows everyone to have a single Retirement Savings Account at the provider of their choosing with a limit of 60k, then I will use a single fund.

Although, that would make it far easier to manage multiple funds and rebalancing...
"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep
User avatar
Topic Author
Taylor Larimore
Posts: 32839
Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

Re: "The One Fund I Use to Invest for Retirement"

Post by Taylor Larimore »

momar wrote:Someday, when Congress passes the law abolishing separate IRA and 401k/403b/457 accounts and allows everyone to have a single Retirement Savings Account at the provider of their choosing with a limit of 60k, then I will use a single fund.

Although, that would make it far easier to manage multiple funds and rebalancing...
Hi momar:

I agree with you.

Our hodge-podge of multiple complex retirement plans and their constantly changing regulations are an abomination.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
User avatar
ddb
Posts: 5511
Joined: Mon Feb 26, 2007 11:37 am
Location: American Gardens Building, West 81st St.

Re: "The One Fund I Use to Invest for Retirement"

Post by ddb »

Taylor Larimore wrote:Bogleheads:

Philip Taylor, CPA, maintains a no-nonsense blog that he calls PT Money. His latest article caught my eye. It is about Vanguard's Target Retirement 2040:

The One Fund I Use to Invest for Retirement – VFORX

Best wishes.
Taylor
Vanguard's Target Retirement Funds are a wonderful concept. Unfortunately, they are terribly-designed, and a disservice to investors.

For example, the Target Retirement 2020 fund implies suitability for an investor who will retire in 2020. Assuming this person retires at age 65, s/he is now 57. The fund is invested 65% in equities. What the what? The age in bonds rule of thumb would advocate for 43% in equities. That's a big difference!

The 2030 fund is 80% equities! This would be targeted at a person who is currently 47! Absolutely ridiculous. A fund company like Vanguard should err on the side of being too conservative, not too aggressive. Apparently marketing-trumping-common-sense still applies in the fundholder-owned world.

- DDB
"We have to encourage a return to traditional moral values. Most importantly, we have to promote general social concern, and less materialism in young people." - PB
User avatar
ddb
Posts: 5511
Joined: Mon Feb 26, 2007 11:37 am
Location: American Gardens Building, West 81st St.

Re: "The One Fund I Use to Invest for Retirement"

Post by ddb »

momar wrote:Someday, when Congress passes the law abolishing separate IRA and 401k/403b/457 accounts and allows everyone to have a single Retirement Savings Account at the provider of their choosing with a limit of 60k, then I will use a single fund.

Although, that would make it far easier to manage multiple funds and rebalancing...
The insurance industry and financial firms can hire expensive lobbyists. We're as likely to get a greatly simplified income tax system as we are a greatly simplified retirement savings landscape!

- DDB
"We have to encourage a return to traditional moral values. Most importantly, we have to promote general social concern, and less materialism in young people." - PB
User avatar
Topic Author
Taylor Larimore
Posts: 32839
Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

Vanguard Target Funds

Post by Taylor Larimore »

Bogleheads:

I am a strong advocate of Vanguard's expertly designed Target Funds (in tax-advantaged accounts). Morningstar gives them (as a group) their top-rating. This is how they ranked in Lipper peer-group performance at the end of 2010:

TOP................................... 1-year.....3-years..... 5-years
Target Retirement 2010 Fund... 66.45% .... 74.02%
Target Retirement 2015 Fund... 64.46% .....76.47%......91.89%
Target Retirement 2020 Fund... 63.74% .....83.59%
Target Retirement 2025 Fund... 59.60% .....69.23%......80.77%
Target Retirement 2030 Fund... 66.07% .....87.20%
Target Retirement 2035 Fund... 69.15% .....72.31%..... 80.77%
Target Retirement 2040 Fund... 63.86% .... 89.57%
Target Retirement 2045 Fund... 56.38% .....75.38%......77.78%
Target Retirement 2050 Fund... 63.01% .... 83.95%

Knowledgeable investors select and maintain target funds based on their desired stock/bond ratio--not the target date.

Edit below:

T. Rowe Price Retirement 2040 uses 10 funds,
ARDVX American Century LIVESTRONG 2040 uses 13,
MFS Lifetime 2040 uses 16,
American Funds 2040 Target Date uses 17,
Schwab Target 2040 uses 19, and
Fidelity Freedom 2040 uses no less than 20 funds.

Most Vanguard Target funds use 3 funds: Total Stock Market, Total International and Total Bond Market. Less is more.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
User avatar
Mel Lindauer
Moderator
Posts: 35757
Joined: Mon Feb 19, 2007 7:49 pm
Location: Daytona Beach Shores, Florida
Contact:

Re: "The One Fund I Use to Invest for Retirement"

Post by Mel Lindauer »

ddb wrote:
Taylor Larimore wrote:Bogleheads:

Philip Taylor, CPA, maintains a no-nonsense blog that he calls PT Money. His latest article caught my eye. It is about Vanguard's Target Retirement 2040:

The One Fund I Use to Invest for Retirement – VFORX

Best wishes.
Taylor
Vanguard's Target Retirement Funds are a wonderful concept. Unfortunately, they are terribly-designed, and a disservice to investors.

For example, the Target Retirement 2020 fund implies suitability for an investor who will retire in 2020. Assuming this person retires at age 65, s/he is now 57. The fund is invested 65% in equities. What the what? The age in bonds rule of thumb would advocate for 43% in equities. That's a big difference!

The 2030 fund is 80% equities! This would be targeted at a person who is currently 47! Absolutely ridiculous. A fund company like Vanguard should err on the side of being too conservative, not too aggressive. Apparently marketing-trumping-common-sense still applies in the fundholder-owned world.

- DDB
That's why we always tell invstors to ignore the date in any company's target date fund name and look under the hood in order to select the fund that most closely matches their desired asset allocation.
Best Regards - Mel | | Semper Fi
User avatar
Mel Lindauer
Moderator
Posts: 35757
Joined: Mon Feb 19, 2007 7:49 pm
Location: Daytona Beach Shores, Florida
Contact:

Re: "The One Fund I Use to Invest for Retirement"

Post by Mel Lindauer »

FWIW, I'm also a huge fan of Vanguard's Target Retirement Income fund (VTINX) for a retiree. Nicely-diversified portfolio in a single holding that includes the oft-recommended three-fund portfolio (Total Stock, Total Int'l. and Total Bond) plus TIPS. IMO, it doesn't get any better or simpler than that.
Best Regards - Mel | | Semper Fi
beardsworth
Posts: 2135
Joined: Fri Jun 15, 2007 4:02 pm

Re: "The One Fund I Use to Invest for Retirement"

Post by beardsworth »

If I could design an all-in-one Vanguard balanced fund, its stock component would be Total World Stock Index and (because I'd prefer to keep most collapse risk on the equity side) its bond component would consist only of Treasury-quality securities--a combination of GNMAs, "regular" Treasury notes/bonds, and TIPS. And it would be available in different allocation "flavors," e.g., 40/60, 50/50, and 60/40. . . . This can, of course, be assembled by combining several currently available Vanguard funds, but not with the convenient "one stop shopping" and automatic internal rebalancing of Vanguard's existing balanced funds, all of which (IMO unfortunately) heavily favor large-cap domestic companies and contain large amounts of corporate bonds.
User avatar
englishgirl
Posts: 2508
Joined: Thu Mar 01, 2007 4:34 pm
Location: FL

Re: "The One Fund I Use to Invest for Retirement"

Post by englishgirl »

Ah, yes.

One fund to rule them all, One fund to find them, One fund to bring them all, and in the darkness bind them.

I keep wanting to want to switch to a Target Retirement fund, but they're just so darn aggressive. And I don't want to switch to an earlier date fund, because then they get too darn conservative too quickly.

Maybe one day I'll just bite the bullet and switch, but I keep waffling between LifeStrategy (I like the AA of the moderate fund), Target Retirement (I like that the AA automatically gets more conservative and brings in TIPs as you age), and Balanced Index (I already have international in another account that I can't change easily so I don't need much more). As it is, I want to add TIPs to any of them. None of them are perfect for me, but I can't seem to settle on one that is good enough.
Sarah
mikep
Posts: 3855
Joined: Wed Apr 22, 2009 9:27 pm

Re: "The One Fund I Use to Invest for Retirement"

Post by mikep »

I'll be the devil's advocate.
I don't like them for large amounts. Hold admiral shares of the 3 fund portfolio at a 50% ER savings. Takes 2 min per year to rebalance. Costs matter, we all know that. Why pay double?
Also you won't suffer from Vangard changing them.. they already changed them twice already in 6 years:
Added more international from 20 to 30%, just in time for international stocks to perform worse than domestic last year.
Increased stock exposure in 2007 near the peak just in time for the crash.

I don't think these are going to stay the same for 30 more years. Trust me, they will tinker with it.. add international bonds or something coming soon..
Last edited by mikep on Fri Feb 17, 2012 7:49 pm, edited 2 times in total.
User avatar
Cut-Throat
Posts: 2011
Joined: Sun Oct 17, 2010 9:46 am

Re: "The One Fund I Use to Invest for Retirement"

Post by Cut-Throat »

Mel Lindauer wrote:FWIW, I'm also a huge fan of Vanguard's Target Retirement Income fund (VTINX) for a retiree. Nicely-diversified portfolio in a single holding that includes the oft-recommended three-fund portfolio (Total Stock, Total Int'l. and Total Bond) plus TIPS. IMO, it doesn't get any better or simpler than that.
+1
After 30 years of fiddling with different components of my AA, I have settled on this fund, and no longer 'second guess' my asset classes. Choosing to invest in Index Funds was my first step.....Then 're-thinking' every Asset Class every year was just as 'money losing' as investing in individual stocks.

Since, I now own 1 Fund, I cannot do anything....and doing nothing has been my best investing move in 30 years. :mrgreen:
User avatar
momar
Posts: 1359
Joined: Sun Nov 13, 2011 11:51 am

Re: "The One Fund I Use to Invest for Retirement"

Post by momar »

mikep wrote:I'll be the devil's advocate.
I don't like them for large amounts. Hold admiral shares of the 3 fund portfolio at a 50% ER savings. Takes 2 min per year to rebalance.
Also you won't suffer from Vangard changing them.. they already changed them twice already in 6 years:
Added more international from 20 to 30%, just in time for international stocks to perform worse than domestic last year.
Increased stock exposure in 2007 near the peak just in time for the crash.

I don't think these are going to stay the same for 30 more years. Trust me, they will tinker with it.. add international bonds or something coming soon..
I could be wrong, but I believe the TR funds have outperformed the individual funds because they engage in daily rebalancing.
"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep
User avatar
ObliviousInvestor
Posts: 4212
Joined: Tue Mar 17, 2009 9:32 am
Contact:

Re: "The One Fund I Use to Invest for Retirement"

Post by ObliviousInvestor »

mikep wrote:I don't like them for large amounts. Hold admiral shares of the 3 fund portfolio at a 50% ER savings. Takes 2 min per year to rebalance. Costs matter, we all know that. Why pay double?
For the stock portion, it's approximately double (.20% ER as opposed to .11% ER, given the 70% US/30% international split). And for any amounts allocated to the TIPS fund it's exactly double (0.22% instead of 0.11%). But for the portion allocated to Total Bond, the costs are almost the same (0.12% as opposed to 0.11%, because the funds-of-funds hold Total Bond Market II).
Mike Piper | Roth is a name, not an acronym. If you type ROTH, you're just yelling about retirement accounts.
Wild Willie
Posts: 202
Joined: Mon Jul 05, 2010 10:15 am

Re: "The One Fund I Use to Invest for Retirement"

Post by Wild Willie »

+1
After 30 years of fiddling with different components of my AA, I have settled on this fund, and no longer 'second guess' my asset classes. Choosing to invest in Index Funds was my first step.....Then 're-thinking' every Asset Class every year was just as 'money losing' as investing in individual stocks.

Since, I now own 1 Fund, I cannot do anything....and doing nothing has been my best investing move in 30 years.


X2, couldn't be happier with VTINX (Vanguard Target Retirement Income Fund).
User avatar
joe8d
Posts: 4544
Joined: Tue Feb 20, 2007 7:27 pm
Location: Buffalo,NY

Re: "The One Fund I Use to Invest for Retirement"

Post by joe8d »

Mel Lindauer wrote:FWIW, I'm also a huge fan of Vanguard's Target Retirement Income fund (VTINX) for a retiree. Nicely-diversified portfolio in a single holding that includes the oft-recommended three-fund portfolio (Total Stock, Total Intl. and Total Bond) plus TIPS. IMO, it doesn't get any better or simpler than that.
i would consider using the LS Conservative Growth ( 40 stock/60 TBM ) in combo with a separate TIPS fund instead. Reasons being elimination of the TR Income 5% cash component and allowing the TIPS fund to run as long as possible on it own to maximize it's unique ( Inflation adjustment and yield reinvestment )TD feature.One could manage the bond exposure with the amount held in the TIPS fund and by taking RMDs from just the LS fund and leaving the TIPs fund to grow you would increase your bond exposure as you age.TIPS would the ultimate " Bond" to be holding in the late stage of your retirement.
All the Best, | Joe
mwm158
Posts: 475
Joined: Sat Jun 25, 2011 6:55 pm

Re: "The One Fund I Use to Invest for Retirement"

Post by mwm158 »

deleted
Last edited by mwm158 on Wed Jan 07, 2015 8:51 pm, edited 1 time in total.
User avatar
DiscoBunny1979
Posts: 2054
Joined: Sun Oct 21, 2007 10:59 am

Re: "The One Fund I Use to Invest for Retirement"

Post by DiscoBunny1979 »

I'm still liking the STAR Fund for my ROTH IRA as the only Fund I use. While I appreciate the effort with Indexing in Target Funds, I still believe that the Target Funds are nothing more than a marketing tool for Vanguard.
beardsworth
Posts: 2135
Joined: Fri Jun 15, 2007 4:02 pm

Re: "The One Fund I Use to Invest for Retirement"

Post by beardsworth »

mwm158 wrote:
BHChinook wrote:I understand that risks associated with equities actually increase with holding time.
WTF are you talking about? That doesn't make any sense.
mwm158,

First, IMO your tone is rude and unnecessarily confrontational toward another poster.

Second, suggest you begin by reading the following paper (which has been cited repeatedly on this forum), then search for others on the subject if interested in further open-minded exploration:

http://www.norstad.org/finance/risk-and-time.html

The following recent thread may also be thought-provoking:

http://www.bogleheads.org/forum/viewtop ... 10&t=90365
BHChinook
Posts: 200
Joined: Mon Nov 26, 2007 11:44 am
Location: East Texas

Re: "The One Fund I Use to Invest for Retirement"

Post by BHChinook »

MarcMyWord replied to this before I could get to it. Norstad references other publications, the sum of which, imho, should have revolutionized the makeup of target funds. It does not seem to have and I await the day when more discussions of this important concept are presented (by those more knowledgable on the topic than I). For now, I am respecting the idea that risks for equities increase with the time horizon - not decrease.
It's always easier to do nothing than to do something.
mwm158
Posts: 475
Joined: Sat Jun 25, 2011 6:55 pm

Re: "The One Fund I Use to Invest for Retirement"

Post by mwm158 »

deleted
Last edited by mwm158 on Wed Jan 07, 2015 8:52 pm, edited 1 time in total.
beardsworth
Posts: 2135
Joined: Fri Jun 15, 2007 4:02 pm

Re: "The One Fund I Use to Invest for Retirement"

Post by beardsworth »

mwm158 wrote:
BHChinook wrote:I understand that risks associated with equities actually increase with holding time.
WTF are you talking about? That doesn't make any sense.
MarcMyWord wrote:mwm158,

First, IMO your tone is rude and unnecessarily confrontational toward another poster.
mwm158 wrote:You're just dishing out bad statistics, maybe you should sell insurance.
I rest my case.
Dandy
Posts: 6701
Joined: Sun Apr 25, 2010 7:42 pm

Re: "The One Fund I Use to Invest for Retirement"

Post by Dandy »

While there is agreement that Target Date funds should be selected by their portfolio allocation not the target date it is still inexcusable that Vanguard has such aggressive equity allocations especially for the distant target dates.

Many people, especially young people, don't necessarily know the "secret" to look at the allocation and buy based on the target date. Those people put their trust in Vanguard and are probably are not suited for something like 89% equities (Target Date 2040). That Target Date would be for someone in their 30's -- really ?? My guess is only about 10% of people in their 30's would find 89% equities close to their risk tolerance.

Why not get the Target Date allocation to be more "reasonable" and let aggressive/knowledgeable investors look under the hood at the allocation and choose to get a later dated target date fund? Instead we ask the less aggressive probably less knowledgeable people to look under the hood.

Was there ever a good explanation for the change to make the funds more aggressive??
User avatar
Cut-Throat
Posts: 2011
Joined: Sun Oct 17, 2010 9:46 am

Re: "The One Fund I Use to Invest for Retirement"

Post by Cut-Throat »

Dandy wrote: Many people, especially young people, don't necessarily know the "secret" to look at the allocation and buy based on the target date. Those people put their trust in Vanguard and are probably are not suited for something like 89% equities (Target Date 2040).
Really ? - How about the young people that go down to their local full service broker and ask for some 'investing help' :shock:

I say, if they're savvy enough to be buying a Target Fund, that is a much bigger secret than to figure out the asset allocation of the Target Fund. :wink:
Beagler
Posts: 3442
Joined: Sun Dec 21, 2008 6:39 pm

Re: "The One Fund I Use to Invest for Retirement"

Post by Beagler »

mwm158 wrote:
BHChinook wrote:I understand that risks associated with equities actually increase with holding time.
WTF are you talking about? That doesn't make any sense.
Have you ever priced equity puts? Which is more costly, one dated next month or one dated in 10 years?
“The only place where success come before work is in the dictionary.” Abraham Lincoln. This post does not provide advice for specific individual situations and should not be construed as doing so.
mwm158
Posts: 475
Joined: Sat Jun 25, 2011 6:55 pm

Re: "The One Fund I Use to Invest for Retirement"

Post by mwm158 »

deleted
Last edited by mwm158 on Wed Jan 07, 2015 8:52 pm, edited 1 time in total.
nbatt
Posts: 56
Joined: Fri Nov 12, 2010 5:21 pm

Re: "The One Fund I Use to Invest for Retirement"

Post by nbatt »

Mel was right when he recommended mid caps over ten years ago and he is right now suggesting VTINX for retiree's. I am willing to bet that the majority of individual investors will do worse over the next decade with their hodge podge of holdings than if they just held VTINX at 30% stock! VTINX will stay the course, automatically rebalance, and will serve the conservative investor well.
Beagler
Posts: 3442
Joined: Sun Dec 21, 2008 6:39 pm

Re: "The One Fund I Use to Invest for Retirement"

Post by Beagler »

mwm158 wrote:
Beagler wrote: Have you ever priced equity puts? Which is more costly, one dated next month or one dated in 10 years?
The 10 year put has all of the advantages of the one month put, plus extra time to potentially make money - hence it costs more. Was this a trick question? Not sure what this has to do with anything.
Perhaps you'll believe Wm. Bernstein, who says "stocks do indeed become more risky with time, the proof of the pudding being that equity puts become more expensive with maturity, and not the other way around."

With equity puts, it's about a strike price, and the amount an investor pays for the right to exercise. The cost goes up as the duration lengthens. Was it a trick question? No, it's about the fact that stocks are not less risky over time, as evidenced by the cost assuming the "extra time to potentially make money," as you put it.
“The only place where success come before work is in the dictionary.” Abraham Lincoln. This post does not provide advice for specific individual situations and should not be construed as doing so.
mwm158
Posts: 475
Joined: Sat Jun 25, 2011 6:55 pm

Re: "The One Fund I Use to Invest for Retirement"

Post by mwm158 »

deleted
Last edited by mwm158 on Wed Jan 07, 2015 8:52 pm, edited 1 time in total.
Grasshopper
Posts: 1208
Joined: Sat Oct 09, 2010 3:52 pm

Re: "The One Fund I Use to Invest for Retirement"

Post by Grasshopper »

DiscoBunny1979 wrote:I'm still liking the STAR Fund for my ROTH IRA as the only Fund I use. While I appreciate the effort with Indexing in Target Funds, I still believe that the Target Funds are nothing more than a marketing tool for Vanguard.
''

STAR Fund VGSTX is a core holding tweaked with some more short-term bond, and a high dividend EFT. I am in disbursement stage.
User avatar
Topic Author
Taylor Larimore
Posts: 32839
Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

Targe funds a "marketing tool?"

Post by Taylor Larimore »

Disco Bunny:
I still believe that the Target Funds are nothing more than a marketing tool for Vanguard.
It seems to me that Target Funds have several significant advantages for many investors:

* Portfolios are designed by Vanguard experts.
* Very Low cost
* 11 stock/bond allocations to choose from.
* Contain mostly total market index funds (Mr. Bogle's choice).
* Automatically rebalance themselves.
* Automatically become more conservative with age.
* Simple to understand and maintain.
* Can be easily assumed by care-givers and heirs.
* Morningstar gives Vanguard Target funds their highest rating.

Why do you think they are "nothing more than a marketing tool for Vanguard?"

Thank you and best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
mhalley
Posts: 10424
Joined: Tue Nov 20, 2007 5:02 am

Re: "The One Fund I Use to Invest for Retirement"

Post by mhalley »

If you will recall, the TR funds used to be less aggressive, but in 2006 Vanguard made them more aggressive, as I recall it was because most of the other companies that sell TR funds were more aggressive than the Vanguard offerings, so if you did a return comparison the Vanguard funds looked like they were grossly underperforming their counterparts at other MF firms. That probably seemed like a good idea at the time, but with the market crash they would look pretty good now if they had kept them at their original aa.
Mike
User avatar
ddb
Posts: 5511
Joined: Mon Feb 26, 2007 11:37 am
Location: American Gardens Building, West 81st St.

Re: Vanguard Target Funds

Post by ddb »

Taylor Larimore wrote:Knowledgeable investors select and maintain target funds based on their desired stock/bond ratio--not the target date.
Mel Lindauer wrote:That's why we always tell invstors to ignore the date in any company's target date fund name and look under the hood in order to select the fund that most closely matches their desired asset allocation.
Unfortunately, Target Date funds are both geared towards and most suitable for UNKNOWLEDGEABLE investors who probably aren't reading books on investing or visiting Bogleheads.org on a regular basis. Vanguard should be doing a better job with their target date allocations. Come on, the above two comments seem to ignore a major flaw in these funds. Do either of you really think that the allocations in these funds are reasonable?

- DDB
"We have to encourage a return to traditional moral values. Most importantly, we have to promote general social concern, and less materialism in young people." - PB
User avatar
Mel Lindauer
Moderator
Posts: 35757
Joined: Mon Feb 19, 2007 7:49 pm
Location: Daytona Beach Shores, Florida
Contact:

Re: Vanguard Target Funds

Post by Mel Lindauer »

ddb wrote:
Taylor Larimore wrote:Knowledgeable investors select and maintain target funds based on their desired stock/bond ratio--not the target date.
Mel Lindauer wrote:That's why we always tell invstors to ignore the date in any company's target date fund name and look under the hood in order to select the fund that most closely matches their desired asset allocation.
Unfortunately, Target Date funds are both geared towards and most suitable for UNKNOWLEDGEABLE investors who probably aren't reading books on investing or visiting Bogleheads.org on a regular basis. Vanguard should be doing a better job with their target date allocations. Come on, the above two comments seem to ignore a major flaw in these funds. Do either of you really think that the allocations in these funds are reasonable?

- DDB
Yes; otherwise we wouldn't recommend them. Perhaps the major flaw is that some advisors don't like them, since they don't get to rake some off the top by complicating things and making folks think they can't possibly do it by themselves with such simplicty. Despite what many with a vested interest would have you believe, this is beauty and simplicy all rolled into one. Actually they're very sophisticated and offer a nicely-diversified portfolio (Taylor's three-fund portfolio plus TIPS in the later stages) in a single fund that automatically rebalances on a daily basis and automatically gets more conservative as the investor ages.
Best Regards - Mel | | Semper Fi
User avatar
GregLee
Posts: 1748
Joined: Wed Oct 27, 2010 3:54 pm
Location: Waimanalo, HI

Re: "The One Fund I Use to Invest for Retirement"

Post by GregLee »

mwm158 wrote: His comment is still way off. It seems to want to favor unlikely scenarios more than likely ones. Let's say I invest money and every year I flip a coin. If it's heads, it grows by 20% and if it's tails, it drops by 15%. Their argument seemed to be that investing over 100 years is extremely uncertain because I could end up with about nothing or ridiculously large gains. Ignored is the fact that if I flip a coin 100 times, the likelihood of having results far off from 50/50 are extremely minimal.
While I do think you should strive more to be polite, I agree with the basic point. The conservative investors in this forum seem to have a tendency to ignore the improbability of certain worst cases. Roughly, the idea seems to be that if there is a non-zero chance of being conked on the head by a meteorite if you venture outside your house, better stay in.
Greg, retired 8/10.
User avatar
ddb
Posts: 5511
Joined: Mon Feb 26, 2007 11:37 am
Location: American Gardens Building, West 81st St.

Re: Vanguard Target Funds

Post by ddb »

Mel Lindauer wrote:
ddb wrote:Unfortunately, Target Date funds are both geared towards and most suitable for UNKNOWLEDGEABLE investors who probably aren't reading books on investing or visiting Bogleheads.org on a regular basis. Vanguard should be doing a better job with their target date allocations. Come on, the above two comments seem to ignore a major flaw in these funds. Do either of you really think that the allocations in these funds are reasonable?
Yes; otherwise we wouldn't recommend them. Perhaps the major flaw is that some advisors don't like them, since they don't get to rake some off the top by complicating things and making folks think they can't possibly do it by themselves with such simplicty. Despite what many with a vested interest would have you believe, this is beauty and simplicy all rolled into one. Actually they're very sophisticated and offer a nicely-diversified portfolio (Taylor's three-fund portfolio plus TIPS in the later stages) in a single fund that automatically rebalances on a daily basis and automatically gets more conservative as the investor ages.
You're making a straw man argument, Mel.

Target Retirement Funds are an excellent idea that should serve the majority of investors well. But when you have a non-sophisticated 47-year old read the fact sheet for Vanguard's Target 2030 Fund, which states among the 'Who should invest' header: Investors seeking to retire and leave the workforce in or within a few years of 2030 (the target year), and you realize that this fund is EIGHTY PERCENT in equities, there's a disconnect here that needs to be addressed. Generally speaking, an unknowledgeable 47-year old should be nowhere near 80% in stocks. And this hypothetical 47-year old certainly isn't going to educate himself and realize on his own that perhaps the 2020 Fund, or even the 2015 Fund, are more suitable for him.

But yeah, your argument about how why advisors don't like these funds was a very practical response to address the issue that I raise. Thanks for keeping things civil.

- DDB
"We have to encourage a return to traditional moral values. Most importantly, we have to promote general social concern, and less materialism in young people." - PB
Beagler
Posts: 3442
Joined: Sun Dec 21, 2008 6:39 pm

Re: "The One Fund I Use to Invest for Retirement"

Post by Beagler »

This "looking under the hood" business really became popular around the time that VG dramatically increased the % equities in their TR Fund series. As a matter of fact, the TR Funds were so "expertly" crafted that they had to go through a major asset allocation shift just 3 years into their inception, and then again not long ago. Yet there have been no sentinel financial journal papers extolling such dramatic changes. Trinity Study data were no secret when the VG TR Funds were introduced. Even Mr. Bogle questioned the latest shift in TR Fund AA ath the last BH, as part of his presentation.
Last edited by Beagler on Tue Feb 21, 2012 4:07 pm, edited 1 time in total.
“The only place where success come before work is in the dictionary.” Abraham Lincoln. This post does not provide advice for specific individual situations and should not be construed as doing so.
User avatar
Mel Lindauer
Moderator
Posts: 35757
Joined: Mon Feb 19, 2007 7:49 pm
Location: Daytona Beach Shores, Florida
Contact:

Re: "The One Fund I Use to Invest for Retirement"

Post by Mel Lindauer »

This is from your previous post, ddb. Did you bother to even read what I wrote (and what you quoted)? It appears that you didn't and that you're simply barking up the wrong tree. I've put what I said (and what you quoted) in red this time to try to make it easier for you to read.
Mel Lindauer wrote: That's why we always tell invstors to ignore the date in any company's target date fund name and look under the hood in order to select the fund that most closely matches their desired asset allocation.
If your argument is with Vanguard and other fund companies that offer target date funds, that's fine, but then don't bother to quote what I said as if it's my fault, when my recommendation actually directs investors how to properly use the Target Retirement funds.

I've written about this before as far back as 2009, so we do agree that the dates in the fund names should be ignored, but that doesn't negate the fact that properly used (as I've recommended), these are great one-fund portfolios.

http://news.morningstar.com/articlenet/ ... 6718#start
Best Regards - Mel | | Semper Fi
User avatar
ddb
Posts: 5511
Joined: Mon Feb 26, 2007 11:37 am
Location: American Gardens Building, West 81st St.

Re: "The One Fund I Use to Invest for Retirement"

Post by ddb »

Mel Lindauer wrote:This is from your previous post, ddb. Did you bother to even read what I wrote (and what you quoted)? It appears that you didn't and that you're simply barking up the wrong tree. I've put what I said (and what you quoted) in red this time to try to make it easier for you to read.
Mel Lindauer wrote: That's why we always tell invstors to ignore the date in any company's target date fund name and look under the hood in order to select the fund that most closely matches their desired asset allocation.
If your argument is with Vanguard and other fund companies that offer target date funds, that's fine, but then don't bother to quote what I said as if it's my fault, when my recommendation actually directs investors how to properly use the Target Retirement funds.

I've written about this before as far back as 2009, so we do agree that the dates in the fund names should be ignored, but that doesn't negate the fact that properly used (as I've recommended), these are great one-fund portfolios.

http://news.morningstar.com/articlenet/ ... 6718#start
My TR Fund beef is with Vanguard, and not with your excellent advice to look under the hood first. Unfortunately, very few will bother to look under the hood, making what should be a useful tool into a potentially dangerous tool.

My problem with you in this thread was that you managed to take my complaints with Vanguard and turn them into a rant against advisors. Very unprofessional, much like your post a few weeks ago in which you tacitly approved another member's post that SmithBarney brokers are necessarily sleazy.

- DDB
"We have to encourage a return to traditional moral values. Most importantly, we have to promote general social concern, and less materialism in young people." - PB
User avatar
Mel Lindauer
Moderator
Posts: 35757
Joined: Mon Feb 19, 2007 7:49 pm
Location: Daytona Beach Shores, Florida
Contact:

Re: "The One Fund I Use to Invest for Retirement"

Post by Mel Lindauer »

ddb wrote:
Mel Lindauer wrote:This is from your previous post, ddb. Did you bother to even read what I wrote (and what you quoted)? It appears that you didn't and that you're simply barking up the wrong tree. I've put what I said (and what you quoted) in red this time to try to make it easier for you to read.
Mel Lindauer wrote: That's why we always tell investors to ignore the date in any company's target date fund name and look under the hood in order to select the fund that most closely matches their desired asset allocation.
If your argument is with Vanguard and other fund companies that offer target date funds, that's fine, but then don't bother to quote what I said as if it's my fault, when my recommendation actually directs investors how to properly use the Target Retirement funds.

I've written about this before as far back as 2009, so we do agree that the dates in the fund names should be ignored, but that doesn't negate the fact that properly used (as I've recommended), these are great one-fund portfolios.

http://news.morningstar.com/articlenet/ ... 6718#start
My TR Fund beef is with Vanguard, and not with your excellent advice to look under the hood first. Unfortunately, very few will bother to look under the hood, making what should be a useful tool into a potentially dangerous tool.

My problem with you in this thread was that you managed to take my complaints with Vanguard and turn them into a rant against advisors. Very unprofessional, much like your post a few weeks ago in which you tacitly approved another member's post that SmithBarney brokers are necessarily sleazy.

- DDB
I guess some financial advisors can read lots of comments on this DIY forum and interpret them as a "rant". That's your problem, not mine, and I'll continue to speak out and try to help investors simplify their portfolios and get on with their lives without the need for what Jack Bogle calls "the croupiers". Properly used, Target Retirement funds can certainly help millions of investors avoid financial advisors, so I can see why that might bother you.
Best Regards - Mel | | Semper Fi
User avatar
Sheepdog
Posts: 5783
Joined: Tue Feb 27, 2007 2:05 pm
Location: Indiana, retired 1998 at age 65

Re: "The One Fund I Use to Invest for Retirement"

Post by Sheepdog »

Dan Wiener's advice,
I received my regular advertisement mailing from Dan Wiener today. I have received these at least semiannually for over 10 years.....How did he get my address, anyway, as a Vanguard investor? That's another subject.

He wrote "Worse Vanguard fund.. #1 Diversified Equity, #2..Managed Payout funds, #3..Target Retirement 2055 He goes on to blast the whole group. He says here: "This is a super long term fund, and Vanguard is putting its investors into index funds when there are better active funds available to them. Don't forget that when you index all of the market, you get all of the dogs. Virtually any of the active international managers has outperformed Total International, which replaces three regional international funds that initially were part of Target fund's portfolio." He goes on to blast the new high international allocation in them all. Quoting more, "So what's the value in a target fund? Simple: It makes decisions easier for 401 (k) benefit's managers...but at the expense of retirement savers."

No wonder most Bogleheads don't like his "advice".

I thought that you would be interested in this
Unless you try to do something beyond what you have already mastered you will never grow. (Ralph Waldo Emerson)
Beagler
Posts: 3442
Joined: Sun Dec 21, 2008 6:39 pm

Re: Vanguard Target Funds

Post by Beagler »

ddb wrote:fact sheet for Vanguard's Target 2030 Fund, which states among the 'Who should invest' header: Investors seeking to retire and leave the workforce in or within a few years of 2030 (the target year)
An investor "looking under the hood" will be choosing a TR Fund other than the one recommended by VG. How many investors will do that?
“The only place where success come before work is in the dictionary.” Abraham Lincoln. This post does not provide advice for specific individual situations and should not be construed as doing so.
BHChinook
Posts: 200
Joined: Mon Nov 26, 2007 11:44 am
Location: East Texas

Re: "The One Fund I Use to Invest for Retirement"

Post by BHChinook »

It seems to me that this thread has lost its way. Perhaps a new thread titled as Beagler titled his comment "Vanguard Target Funds" would be appropriate.

On the positive, this thread started off in a very useful way and I learned a lot from it. Thanks
It's always easier to do nothing than to do something.
User avatar
ddb
Posts: 5511
Joined: Mon Feb 26, 2007 11:37 am
Location: American Gardens Building, West 81st St.

Re: "The One Fund I Use to Invest for Retirement"

Post by ddb »

Properly used, Target Retirement funds can certainly help millions of investors avoid financial advisors, so I can see why that might bother you.
Mel, does this fall into a "personal attack" category? You're inserting a reason why I don't like Target Funds. I LIKE TARGET FUNDS, I just don't like when they are marketed and designed inappropriately, as is the case with Vanguard.

I went to the tool store the other day because I needed to buy something to screw a phillips-head screw into a piece of wood. I found a flathead screwdriver, which stated on the box, "This tool works to screw phillips-head screws into a piece of head." I took it home and it didn't work.

So, what was the problem? I needed a phillips-head screwdriver, but the product manufacturer misled me into buying the wrong tool. The wrong tool is still a great tool for what it actually does, but it doesn't accomplish my intended objective.

Then Mel stopped by my house and told me that I obviously have something against flathead screwdrivers :roll:

- DDB
"We have to encourage a return to traditional moral values. Most importantly, we have to promote general social concern, and less materialism in young people." - PB
User avatar
Mel Lindauer
Moderator
Posts: 35757
Joined: Mon Feb 19, 2007 7:49 pm
Location: Daytona Beach Shores, Florida
Contact:

Re: "The One Fund I Use to Invest for Retirement"

Post by Mel Lindauer »

ddb wrote:
Mel Lindauer wrote:Properly used, Target Retirement funds can certainly help millions of investors avoid financial advisors, so I can see why that might bother you.
Mel, does this fall into a "personal attack" category? You're inventing a reason why I don't like Target Funds. I LIKE TARGET FUNDS, I just don't like when they are marketed and designed inappropriately, as is the case with Vanguard. Your attitude towards me borders on childish.

I went to the tool store the other day because I needed to buy something to screw a phillips-head screw into a piece of wood. I found a flathead screwdriver, which stated on the box, "This tool works to screw phillips-head screws into a piece of head." I took it home and it didn't work.

So, what was the problem? I needed a phillips-head screwdriver, but the product manufacturer misled me into buying the wrong tool. The wrong tool is still a great tool for what it actually does, but it doesn't accomplish my intended objective.

Then Mel stopped by my house and told me that I obviously have something against flathead screwdrivers :roll:

- DDB
Sorry you got the wrong screwdriver, ddb. Is that what's really causing you to be a bit testy today?

Perhaps you might explain why you dragged Taylor and me into your complaint about how and why you don't like TR funds as if we were somehow responsible for misleading investors. When you finally stated your reasons for disliking the TR fund in your later post, I called your attention to my post (which you had actually quoted), stating that investors should ignore the date in the fund name and select a TR fund that most closely matches their desired asset allocation. So, when I pointed out that my previous quote (which you had quoted) actually addressed your stated problem with the TR fund, you then agreed with me. So the obvious question is why you even bought us into your attack on the TR funds in the first place?

When advisors attack Taylor and me on this forum without cause (other than perhaps to try to somehow embarrass us), then they can expect to get some push back. If the shoe fits, then wear it.

I won't respond any further to your antics.
Best Regards - Mel | | Semper Fi
Post Reply