Target date funds....unsophisticated?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
seamonkey
Posts: 192
Joined: Fri Oct 19, 2012 8:55 pm

Re: Target date funds....unsophisticated?

Post by seamonkey » Tue Jul 10, 2018 10:37 pm

Paying a little premium for convenience is something we all do in one or more parts of our daily life. Target date funds (through lower cost mutual fund companies) are perfectly fine solutions if in a tax-advantaged account and appropriate for your risk tolerance / asset allocation.

If you’re looking for sophisticated, search for the thousand dollar wristwatch threads.

User avatar
bottlecap
Posts: 5855
Joined: Tue Mar 06, 2007 11:21 pm
Location: Tennessee

Re: Target date funds....unsophisticated?

Post by bottlecap » Tue Jul 10, 2018 10:46 pm

A target retirement fund is one of the best options around.

We all think we can do better. Few do. And they are the lucky ones, not the smart ones.

Stay unsophisticated, my friend.

JT

Agggm
Posts: 232
Joined: Mon Dec 25, 2017 6:18 pm

Re: Target date funds....unsophisticated?

Post by Agggm » Tue Jul 10, 2018 11:38 pm

Silk McCue wrote:
Tue Jul 10, 2018 7:19 am
Ron Scott wrote:
Tue Jul 10, 2018 7:13 am
Target date funds, really? If someone posted they changed their AA every year, paid higher fees for investing than they needed to so someone else could manage their investments, invested in funds that unnecessarily manufactured taxable events every year, and set an AA that didn’t really match their personal risk tolerance, the replies would be merciless and the poster would be sent to the Wiki.

But if you explain you committed all these sins with target funds you get a free pass and a pat on the back. OMG...

This is a good thing?
A completely unhelpful post. Please don't try to derail this thread with your unfounded bias. You are simply wrong on so many levels but this has been debated ad nauseam on this site and there is no reason to do so here.

Cheers
Too harsh.

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

Re: Target date funds....unsophisticated?

Post by TwstdSista » Wed Jul 11, 2018 4:01 am

A Target Date Index fund is a fantastic option in all tax advantaged accounts.

They're quite simple, which I guess does make them unsophisticated. Sounds perfect to me!

User avatar
bottlecap
Posts: 5855
Joined: Tue Mar 06, 2007 11:21 pm
Location: Tennessee

Re: Target date funds....unsophisticated?

Post by bottlecap » Wed Jul 11, 2018 6:49 am

Ron Scott wrote:
Tue Jul 10, 2018 7:13 am
Target date funds, really?
Yup. Really. You’re missing the fact that most people that have lives to live will not rebalance regularly and, for fear of market conditions, may even hesitate to rebalance. Reality trumps theory.

It is well worth a few extra basis points in a tax advantaged account to take these very human frailties out of the equation.

JT

digit8
Posts: 614
Joined: Mon Jul 14, 2008 5:26 pm

Re: Target date funds....unsophisticated?

Post by digit8 » Wed Jul 11, 2018 9:07 am

bottlecap wrote:
Wed Jul 11, 2018 6:49 am
Ron Scott wrote:
Tue Jul 10, 2018 7:13 am
Target date funds, really?
Yup. Really. You’re missing the fact that most people that have lives to live will not rebalance regularly and, for fear of market conditions, may even hesitate to rebalance. Reality trumps theory.
It is well worth a few extra basis points in a tax advantaged account to take these very human frailties out of the equation.
+1. I have always drawn a comparison between personal finance and weight loss strategies: in either, a less-than-perfect program you can stick with for life beats somebodys "optimized" version that you'll run with for a month (usually January) and then never follow through on.
"You can't latte yourself to bankruptcy. The bladder won't allow it." | -Katherine Porter

texasdiver
Posts: 2718
Joined: Thu Jun 25, 2009 12:50 am
Location: Vancouver WA

Re: Target date funds....unsophisticated?

Post by texasdiver » Wed Jul 11, 2018 6:47 pm

My wife and I have the bulk of our investments in two target retirement funds.

Myself in the TSP where there is no added fee penalty for using the target retirement option
My wife in a Vanguard rollover IRA where there is a slight fee penalty compared to using admiral shares of the underlying funds instead.

I was going to minimize fees by breaking out my wife's holdings into individual funds but I have not bothered to do so and I don't think I will.

What I really like about holding a single blended fund portfolio is that I no longer watch or fret about the individual fund components. When I monitor account balances in Quicken all I see now is the fund values and holdings of the target date funds. The large cap, small cap, and international components are never separately broken out. So I'm never left guessing and fretting about my allocation percentages and never tempted to chase results or mess around with my allocation percentages based on current events. When my portfolio was more broken out into 3-4 individual funds I was endlessly fretting about whether I had the right allocation percentages and why one sector was performing better than the other. Keeping everything in one fund just relieves me of that worry and I just defer to the TSP and Vanguard managers who I'm sure have thought about these things a lot more than I have.

averagedude
Posts: 211
Joined: Sun May 13, 2018 3:41 pm

Re: Target date funds....unsophisticated?

Post by averagedude » Wed Jul 11, 2018 7:01 pm

ANKLEDEEP wrote:
Tue Jul 10, 2018 12:37 am
Quick post here....

Myself and my wife are currently maxing out our Roth’s with Vanguard 2055 funds....we are also funding employer matiching accounts, taxable, etc....but wanted to focus on the target date funds.

I recently read a post of a member where they called target date funds “unsophisticated”....I kind of like the idea of not haveing to rebalance or fund multiple accounts each month..... I understand that I am paying a slightly higher fee for this, but am I missing the boat?

Am I being a “unsophisticated” investor by choosing to fund Roth’s with target date funds?
I didn't bother reading all of the answers from the boglehead community, but i would say if i was a commissioned salesman in the financial world, you are leaving alot of money on the sidelines. I could get you way better returns than these people, and i could get you in a complicated annuity that would be a home run for your financial future, not to mention my financial future. There is a price to be paid to be unsophisticated in the complex world of investing. You could ignore me and pay your children's college, but what about my kids. They deserve to be educated just like your kids! I have been studying the market for decades, and i have developed the holy grail of getting you into the market at the bottom's and getting you out at the tops. I have a newsletter if you are interested. Send me a private message if you would like.

User avatar
Taylor Larimore
Advisory Board
Posts: 27505
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Re: Target date funds....unsophisticated?

Post by Taylor Larimore » Wed Jul 11, 2018 8:14 pm

Am I being a “unsophisticated” investor by choosing to fund Roth’s with target date funds?
ANKLEDEEP:

When you invest in a Vanguard target date fund, designed by company experts, with Morningstar's highest Gold rating, you are invested in a fund that is as "sophisticated" as it gets.

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

ANKLEDEEP
Posts: 21
Joined: Sun Oct 22, 2017 11:04 pm

Re: Target date funds....unsophisticated?

Post by ANKLEDEEP » Wed Jul 11, 2018 10:16 pm

Taylor Larimore wrote:
Wed Jul 11, 2018 8:14 pm
Am I being a “unsophisticated” investor by choosing to fund Roth’s with target date funds?
ANKLEDEEP:

When you invest in a Vanguard target date fund, designed by company experts, with Morningstar's highest Gold rating, you are invested in a fund that is as "sophisticated" as it gets.

Best wishes
Taylor
Thank you Taylor...very positive feedback

daveydoo
Posts: 1564
Joined: Sun May 15, 2016 1:53 am

Re: Target date funds....unsophisticated?

Post by daveydoo » Wed Jul 11, 2018 10:42 pm

CFO of my organization -- with a $5 billion annual budget -- invests his entire tax-deferred account in our VG target date funds. He's pretty sophisticated.
"I mean, it's one banana, Michael...what could it cost? Ten dollars?"

User avatar
steve roy
Posts: 1582
Joined: Thu May 13, 2010 5:16 pm

Re: Target date funds....unsophisticated?

Post by steve roy » Wed Jul 11, 2018 10:59 pm

I used to be real sophisticated. I had an oh-so-sophisticated financial advisor who bought and sold equities for me with a carefree abandon. It cost me a mere 2% off of the top. In return I got colorful bar charts and the occasional spiffy sit-down lunch.

But after years of this, I discovered I would have been FAR better off being in a crude and unsophisticated S & P 500 index fund. I stopped being sophisticated and came here.

And ever since, I’ve been way less sophisticated but earned lots more money.

JustinR
Posts: 743
Joined: Tue Apr 27, 2010 11:43 pm

Re: Target date funds....unsophisticated?

Post by JustinR » Thu Jul 12, 2018 1:53 am

ANKLEDEEP wrote:
Tue Jul 10, 2018 12:37 am
Quick post here....

Myself and my wife are currently maxing out our Roth’s with Vanguard 2055 funds....we are also funding employer matiching accounts, taxable, etc....but wanted to focus on the target date funds.

I recently read a post of a member where they called target date funds “unsophisticated”....I kind of like the idea of not haveing to rebalance or fund multiple accounts each month..... I understand that I am paying a slightly higher fee for this, but am I missing the boat?

Am I being a “unsophisticated” investor by choosing to fund Roth’s with target date funds?
You're going to have to provide a link to this post because I don't believe anyone here would say that. Or mean it in the way you're thinking.

Silk McCue
Posts: 1303
Joined: Thu Feb 25, 2016 7:11 pm

Re: Target date funds....unsophisticated?

Post by Silk McCue » Thu Jul 12, 2018 5:34 am

JustinR wrote:
Thu Jul 12, 2018 1:53 am
You're going to have to provide a link to this post because I don't believe anyone here would say that. Or mean it in the way you're thinking.
If you had read the thread you would have found the source of the quote.

Cheers

3funder
Posts: 758
Joined: Sun Oct 15, 2017 9:35 pm

Re: Target date funds....unsophisticated?

Post by 3funder » Thu Jul 12, 2018 6:08 am

mancich wrote:
Tue Jul 10, 2018 5:28 am
Nothing wrong with a target date fund, especially from Vanguard. One-stop solution, and beats the pants off most other solutions if you don't want to manage 3-4 funds yourself. :beer
+1. You could do MUCH worse, but not MUCH better.

Post Reply