Glide path for Target Retirement funds

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Do the Target Retirement funds provide useful benchmarks of how to change asset allocation with time?

Yes, I use them as models (or will)
29
36%
Yes, I use them as models (or will)
29
36%
No, I use something else (explain below)
18
23%
Benchmarks? We don' need no steenkin' benchmarks!
2
3%
Benchmarks? We don' need no steenkin' benchmarks!
2
3%
 
Total votes: 80

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sgr000
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Glide path for Target Retirement funds

Post by sgr000 » Thu Feb 14, 2008 8:45 pm

I'm in my early 50's, and have an allocation of 20% bonds, 5% REITS, and 75% stocks. I've never had a problem with holding an aggressive allocation like that; for example, I was 100% equity until my early 40's.

Still, it seemed prudent to look for some benchmarks about the "glide path" of asset allocation approaching retirement. There are -- unsurprisingly -- lots of opinions, all over the map. I thought it might be interesting to take a look at the Target Retirement funds to see what they do, and because as Vanguard Diehards we presumably think that would be a reasonably responsible benchmark.

This post is a summary of what I discovered they do, and a few remarks. I've tried pretty hard to avoid drawing conclusions about the approriateness of the asset allocation and glide path for these funds, but rather just to figure out what it is and what that might mean.

For the record, the fund symbols used in the Target Retirement portfolios are:

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Table 1.
VTSMX: Total Stock Market Index Fund 
VEURX: Europe Stock Index Fund
VPACX: Pacific Stock Index Fund
VEIEX: Emerging Markets Index Fund
VBMFX: Total Bond Market Index Fund
VIPSX: Treasury Inflation-Protected Securities (TIPS) Fund
VMMXX: Prime Money Market Fund
The first order of business is to look at the funds they invest in, and how the allocations vary over time. This is straightforward though tedious to extract from the Vanguard web pages. Here are their percent allocations reported as of 11-Feb-2008:

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Table 2.
Symbol Year VTSMX VBMFX VEURX VPACX VEIEX VIPSX VMMXX
 VFIFX 2050  72.1  10.0   9.9   4.4   3.6   0.0   0.0
 VTIVX 2045  71.8  10.2  10.0   4.4   3.6   0.0   0.0
 VFORX 2040  72.0  10.1   9.9   4.4   3.6   0.0   0.0
 VTTHX 2035  71.9  10.1  10.0   4.4   3.6   0.0   0.0
 VTHRX 2030  69.3  13.5   9.5   4.2   3.5   0.0   0.0
 VTTVX 2025  63.2  21.1   8.7   3.8   3.2   0.0   0.0
 VTWNX 2020  57.1  28.6   7.9   3.5   2.9   0.0   0.0
 VTXVX 2015  51.0  36.2   7.1   3.1   2.6   0.0   0.0
 VTENX 2010  44.1  40.3   6.2   2.7   2.3   4.4   0.0
 VTOVX 2005  34.6  41.9   4.8   2.1   1.6  13.2   1.6
 VTINX 2000  23.8  45.2   3.3   1.4   1.2  20.1   5.0
Assigning VTSMX/VEURX/VPACX/VEIEX to "stocks", VBMFX/VIPSX to "bonds", and VMMXX to "cash", we come up with the following asset allocation glide path into retirement:

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Table 3.
Symbol Year STOCKS BONDS CASH
 VFIFX 2050   90.0  10.0  0.0
 VTIVX 2045   89.8  10.2  0.0
 VFORX 2040   89.9  10.1  0.0
 VTTHX 2035   89.9  10.1  0.0
 VTHRX 2030   86.5  13.5  0.0
 VTTVX 2025   78.9  21.1  0.0
 VTWNX 2020   71.4  28.6  0.0
 VTXVX 2015   63.8  36.2  0.0
 VTENX 2010   55.3  44.7  0.0
 VTOVX 2005   43.1  55.1  1.6
 VTINX 2000   29.7  65.3  5.0
Now let's look at the suballocations to foreign stocks. We'll compute the allocation to foreign stocks as a fraction of total equity, and then the suballocations within that to Europe, Pacific, and emerging markets:

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Table 4.
Symbol Year FOREIGN EURO  PAC EMERG
 VFIFX 2050    19.9 55.3 24.6  20.1
 VTIVX 2045    20.0 55.6 24.4  20.0
 VFORX 2040    19.9 55.3 24.6  20.1
 VTTHX 2035    20.0 55.6 24.4  20.0
 VTHRX 2030    19.9 55.2 24.4  20.3
 VTTVX 2025    19.9 55.4 24.2  20.4
 VTWNX 2020    20.0 55.2 24.5  20.3
 VTXVX 2015    20.1 55.5 24.2  20.3
 VTENX 2010    20.3 55.4 24.1  20.5
 VTOVX 2005    19.7 56.5 24.7  18.8
 VTINX 2000    19.9 55.9 23.7  20.3
Finally, let's consider the suballocations in the bond sector. Basically, we're looking for the fraction of TIPS vs everything else. (Where "everything else" means VBMFX, which you've got to admit is a pretty good proxy for "everything else" in the US bond market, no?)

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Table 5.
Symbol Year TIPS NONTIPS
 VFIFX 2050  0.0   100.0
 VTIVX 2045  0.0   100.0
 VFORX 2040  0.0   100.0
 VTTHX 2035  0.0   100.0
 VTHRX 2030  0.0   100.0
 VTTVX 2025  0.0   100.0
 VTWNX 2020  0.0   100.0
 VTXVX 2015  0.0   100.0
 VTENX 2010  9.8    90.2
 VTOVX 2005 24.0    76.0
 VTINX 2000 30.8    69.2
If you plot the glide path of asset allocations and specific fund allocations over time, you get a picture like this:

Image

Ok, so what should we make of all that?
  • Glide path, i.e., how the risk is reduced over time:
    • Beyond 2035, the 4 most aggressive funds are identical. Although their asset allocations are identical, they differ in policy as to when to begin the glide path.
    • Although the 4 far-future funds are identical, there is no corresponding flattening of the curves at the near end. That is, the funds don't "slow down" the rate of risk attenuation before becoming the income fund (aka 2000 in these plots).
      • I would have expected more of an S-shaped curve, flattening at both ends.
      • This might be an artifact of my arbitrarily assigning VTINX a year of 2000; if this were viewed as a "far retirement" assest allocation whose target retirement date were something like 1995, then there would be some flattening.
    • Though they rebalance foreign suballocations back to a fixed percentage, they do not do anything similar with domestic capitalization or valuation. Perhaps they really don't believe in value/small tilting, or really want to keep the portfolios brutally simple.
  • Foreign equity allocation and suballocations:
    • Foreign equity percentage is almost exactly 20%, for all funds regardless of time horizon. This is clearly a policy decision on Vanguard's part.
    • The foreign funds keep to a constant suballocation of 55% Europe, 25% Pacific, and 20% emerging markets. Clearly another policy decision; perhaps they believe there is a rebalancing bonus to be had by keeping a fixed suballocation.
  • Bond suballocation:
    • There is no allocation to TIPS either until the very end; this is curious.
    • The TIPS percent of the total bond allocation only reaches ~30% at the very end. It's also curious why this is not larger, say 50%.
  • Mysterious small cash allocation:
    • The cash allocation is trivial at all times, except for the final income fund, where it's only 5% -- barely enough to make a diversification difference.
[Edit: fixed an italics bug.]
Last edited by sgr000 on Fri Feb 15, 2008 1:30 pm, edited 1 time in total.

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Post by mikenz » Thu Feb 14, 2008 9:18 pm

I don't agree with their allocations 100%, but I think they are pretty good.

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Post by joe8d » Thu Feb 14, 2008 9:27 pm

I like the component funds of the Vanguard TR series and the glide path of the TRP TR series.Since the revision of Vanguard's TR offering both have similar glide paths to retirement(date on fund )but IMO TRP has the better post retirement portion.
All the Best, | Joe

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Post by unclemick » Thu Feb 14, 2008 9:38 pm

TR 2015 = 100% of my 'real money' retirement portfolio. RMD hits me 2014 so I'm cheating age wise(young at heart). Benchmark glide path - in lieu of ??? - absolutely, why not.

Handgrenades are more fun than horseshoes - or er ah micrometers.

heh heh heh - I can't have handgrenades but I did sneak over the county line and buy fireworks last 4th.

P.S. 64 yrs young and retired.

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Post by Random Musings » Thu Feb 14, 2008 10:40 pm

Most important choice of one's allocation stocks/bonds at any time should be distilled down to one's need of risk.

Hence, the "glide" over time may not properly benchmark with need of risk.

RM

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Post by jh » Thu Feb 14, 2008 11:02 pm

...
Last edited by jh on Mon Feb 18, 2008 1:44 pm, edited 1 time in total.

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Post by sgr000 » Fri Feb 15, 2008 2:22 am

jh wrote:I think the target retirement funds have ludicrously aggressive asset allocations in general. I read an artile the other day that used fidelities target retirement fund for someone age 50. They had 17% fixed income and the rest equities.

LOL... that's more aggressive than I am comfortable with at age 31. :lol:
Well... I was more aggressive than that up until 50; since 50 my portfolio is almost exactly that aggressive. Maybe that's why I like it as a benchmark.

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Post by nisiprius » Fri Feb 15, 2008 10:26 am

I wouldn't say I use them as a "model," but I certainly use them as a "sanity check."

I haven't done this formally, but in writing one's "investment policy statement" it might not be a bad idea to make sure that one has articulated a reason for any big departure from what Vanguard is doing.

I use Fidelity's Freedom Funds as another sample point, by the way.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Post by sscritic » Fri Feb 15, 2008 11:11 am

Although they may be closer now than in the past, there are actually two series, the "0" series and the "5" series. The 5 series was started 10/27/03 and the 0 series was started 6/7/06. When the 0 series was started, the allocations were not close to half way between the closest 5s.

Even today, 2045 is not between 2050 and 2040.

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Symbol Year VTSMX VBMFX VEURX VPACX VEIEX VIPSX VMMXX 
 VFIFX 2050  72.1  10.0   9.9   4.4   3.6   0.0   0.0 
 VTIVX 2045  71.8  10.2  10.0   4.4   3.6   0.0   0.0 
 VFORX 2040  72.0  10.1   9.9   4.4   3.6   0.0   0.0 
Since there are two series, there are two different glide paths.

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Post by nisiprius » Fri Feb 15, 2008 11:52 am

jh wrote:I think the target retirement funds have ludicrously aggressive asset allocations in general.
Me, too. And it bothers me.

Incidentally, for a while I had a big part of my 401(k) in a Fidelity Freedom Fund. I dumped it because they sent me a notice about a rule change that allowed them to put a fatter slice of junk bonds into the fund. That looked to me like chasing performance.

It bothered me quite a bit that something that was supposed to be a put-your-investment-on-autopilot fund wasn't staying the course.

I have an idea that it will turn out that none of these target retirement funds will really stay on their appointed course, but tack and jibe to take advantage of what the fund manager thinks are the prevailing winds. They won't like having competitive funds get upwind of them and take the wind out of their sales (enough nautical metaphor yet?)
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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TR Funds

Post by pkcrafter » Fri Feb 15, 2008 12:42 pm

Nice work, sgr. Thanks.

For the record, I'm with those who think the TR funds are too aggressive. For those who want to be a little more conservative, the TR2030 is the longest fund they can use. And then they will probably be required to switch to another fund when the AA begins to drop lower than they want.

As sgr has shown, these funds do not hit the level of the TR income fund on the target date. From Vanguard strategy link in TR2005:
The fund invests in Vanguard® mutual funds using an asset allocation strategy designed for investors planning to retire before 2008. The fund’s asset allocation will become more conservative over time. Within seven years after 2005, the fund’s asset allocation should resemble that of the Target Retirement Income Fund.
But even though they are not perfect, (where's the REIT and more Int?), they still make very good choices for investors who need autopilot. I think they are superior to Fidelity's funds. TRPrice is close to a draw.

Paul
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Re: Glide path for Target Retirement funds

Post by CyberBob » Fri Feb 15, 2008 1:00 pm

sgr000 wrote:The foreign funds keep to a constant suballocation of 55% Europe, 25% Pacific, and 20% emerging markets. Clearly another policy decision; perhaps they believe there is a rebalancing bonus to be had by keeping a fixed suballocation.
Has the allocation always been that? I don't believe they are sticking to a fixed subacllocation, but rather have that allocation now because that is the current allocation of the Total International Stock Index fund.

I would wager that the international stock allocations are simply mirroring the allocations of Total International Stock and will change as it does. And the Retirement funds likely own the individual international funds rather than Total International simply because economies-of-scale cost and tax benefits.

Bob

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Post by sgr000 » Fri Feb 15, 2008 1:22 pm

sscritic wrote:Even today, 2045 is not between 2050 and 2040.

Code: Select all

Symbol Year VTSMX VBMFX VEURX VPACX VEIEX VIPSX VMMXX 
 VFIFX 2050  72.1  10.0   9.9   4.4   3.6   0.0   0.0 
 VTIVX 2045  71.8  10.2  10.0   4.4   3.6   0.0   0.0 
 VFORX 2040  72.0  10.1   9.9   4.4   3.6   0.0   0.0 
Since there are two series, there are two different glide paths.
Actually, no.

The 4 most aggressive funds are essentially identical, as shown by the data you quoted on the 3 most aggressive. The degree of aggressiveness reaches a maximum and goes no further, even for further-out retirement dates.

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Re: Glide path for Target Retirement funds

Post by sgr000 » Fri Feb 15, 2008 1:25 pm

CyberBob wrote:
sgr000 wrote:The foreign funds keep to a constant suballocation of 55% Europe, 25% Pacific, and 20% emerging markets. Clearly another policy decision; perhaps they believe there is a rebalancing bonus to be had by keeping a fixed suballocation.
Has the allocation always been that? I don't believe they are sticking to a fixed subacllocation, but rather have that allocation now because that is the current allocation of the Total International Stock Index fund.
The thing is, the Target Retirement portfolios don't own the Total International Fund, but directly invest in its components. Whether they will continue to track Total International (which is cap-weighted), or whether they will rebalance back to fixed allocations remains to be seen.

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Re: Glide path for Target Retirement funds

Post by CyberBob » Fri Feb 15, 2008 1:51 pm

sgr000 wrote:Whether they will continue to track Total International (which is cap-weighted), or whether they will rebalance back to fixed allocations remains to be seen.
The allocations aren't fixed, as can be seen by the differing percentages now and in the last few annual/semiannual reports.
They seem to be tracking the Total International Stock Index pretty darn well.

First quarter 2007 (Europe/Pacific/Emerging Markets, rounded to whole numbers)
Target Retirement 2030 58/26/16
Total International Stock Index 59/25/16

January 31, 2008
Target Retirement 2030 55/24/20
Total International Stock Index 55/25/20
sgr000 wrote:The thing is, the Target Retirement portfolios don't own the Total International Fund, but directly invest in its components.
Probably because it's cheaper to do it that way. The individual region funds are available in Admiral and Institutional share classes. Total International Stock Index is not.

Bob

Edit: Interestingly, the Target Retirement funds don't seem to use Admiral or Institutional share classes of the funds. I just checked the latest annual report and they specifically show holdings in investor shares for everything except for Total Stock, which consists of holdings in both investor shares and the ETF share class.

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Re: Glide path for Target Retirement funds

Post by sgr000 » Fri Feb 15, 2008 2:42 pm

CyberBob wrote:The allocations aren't fixed, as can be seen by the differing percentages now and in the last few annual/semiannual reports.
They seem to be tracking the Total International Stock Index pretty darn well.

First quarter 2007 (Europe/Pacific/Emerging Markets, rounded to whole numbers)
Target Retirement 2030 58/26/16
Total International Stock Index 59/25/16

January 31, 2008
Target Retirement 2030 55/24/20
Total International Stock Index 55/25/20
Ok, then that's consistent with the domestic side of the portfolio:
  • On the domestic side, they use Total Stock Market Index, which is cap-weighted.
  • On the international side, although they have separate regional components, they rebalance back to the ratios in Total International Index, which is again cap-weighted.
(Maybe it's silly of me, but I'd still like to see them use something simpler like VFWIX instead.)

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Post by unclemick » Fri Feb 15, 2008 2:44 pm

Each individual's mileage may vary - taking my 'other stuff' - pension and SS as 40% of retirement, TR2015 as 60% - benchmark wise - I have slid my % equity to the more agressive.

So for each individual - you can select/introduce other factors besides age to your Target Retirement selection and still make use of the funds.

Also - thumb on the scale wise you can add exotics on the side - CCF's, Sm cap value, REIT, etc or more fixed to tilt to your situation.

heh heh heh - yep big fan of TR funds here!

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Post by sscritic » Fri Feb 15, 2008 3:06 pm

sgr000 wrote:
sscritic wrote:Even today, 2045 is not between 2050 and 2040.

Code: Select all

Symbol Year VTSMX VBMFX VEURX VPACX VEIEX VIPSX VMMXX 
 VFIFX 2050  72.1  10.0   9.9   4.4   3.6   0.0   0.0 
 VTIVX 2045  71.8  10.2  10.0   4.4   3.6   0.0   0.0 
 VFORX 2040  72.0  10.1   9.9   4.4   3.6   0.0   0.0 
Since there are two series, there are two different glide paths.
Actually, no.

The 4 most aggressive funds are essentially identical, as shown by the data you quoted on the 3 most aggressive. The degree of aggressiveness reaches a maximum and goes no further, even for further-out retirement dates.
Actually, yes.

If you had put essentially in italics, I might have agreed. But you put identical in italics. I said that the two series were created on different dates. I am correct. I said that the 0 series was not located in between the 5 series. I am correct. I said that even today the series are not interleaved in a monotone fashion. I am correct. 71.8 is not between 72.0 and 72.1. I am correct. If you think that 71.8 is between 72.0 and 72.1 and 10.2 is between 10.0 and 10.1, then you should start your own math class.

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Post by gunn_show » Fri Feb 15, 2008 3:16 pm

At this stage, all my pretax SEP IRA money goes into TR 2045 VTIVX

In the future when the pot is larger and I can really slice it how I want it, I may do so. For now, it works just fine, with my retirement horizon 35-40+ yrs away.
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Post by gt4715b » Fri Feb 15, 2008 7:33 pm

sgr000 wrote:
sscritic wrote:
Even today, 2045 is not between 2050 and 2040.
Code:
Symbol Year VTSMX VBMFX VEURX VPACX VEIEX VIPSX VMMXX
VFIFX 2050 72.1 10.0 9.9 4.4 3.6 0.0 0.0
VTIVX 2045 71.8 10.2 10.0 4.4 3.6 0.0 0.0
VFORX 2040 72.0 10.1 9.9 4.4 3.6 0.0 0.0
Since there are two series, there are two different glide paths.
Actually, no.

The 4 most aggressive funds are essentially identical, as shown by the data you quoted on the 3 most aggressive. The degree of aggressiveness reaches a maximum and goes no further, even for further-out retirement dates.


Actually, yes.

If you had put essentially in italics, I might have agreed. But you put identical in italics. I said that the two series were created on different dates. I am correct. I said that the 0 series was not located in between the 5 series. I am correct. I said that even today the series are not interleaved in a monotone fashion. I am correct. 71.8 is not between 72.0 and 72.1. I am correct. If you think that 71.8 is between 72.0 and 72.1 and 10.2 is between 10.0 and 10.1, then you should start your own math class.
The funds from 2035 to 2050 are essentially the same at 90% stocks and 10% bonds. Any differences between them are just slight deviations from the target asset allocation. If you look at the funds closer in you'll see a single glide path. The "0" series and "5" series are not on separate glide paths.

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Post by Levett » Fri Feb 15, 2008 8:35 pm

Take a look at Vanguard's institutional take on target funds. It's the first article in the following link. https://institutional.vanguard.com/iip/ ... PF2007.pdf Bob U.

Also: here's a link to Bill Bernstein's take. http://www.efficientfrontier.com/ef/404/grail.htm

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I believe Vanguard changed the stock to bond

Post by x36900 » Fri Feb 15, 2008 11:57 pm

allocation just a few years ago; prior to that they were criticized for being way too conservative.
I have to chuckle a bit that some folks find them too aggressive today.

But, a beauty of them is that you can always (unless in TR Income) find a more conservative mixture to suit your needs.

Best wishes,
Brian

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Post by BigD53 » Sat Feb 16, 2008 6:52 am

sgr000,

Thank you for the excellent post, and breakdown of the Target Retirement funds.

I found the international allocation to be especially interesting. It seems to follow the thinking of Jack Bogle: keeping up to 20% in foreign stocks.

My largest holding is the Target Retirement Income fund.

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Post by marshall » Sat Feb 16, 2008 7:35 am

I also thought the TR Funds were on the aggressive side. However, I just picked an earlier date that corresponds with my risk tolerence. I plan to retire in 2024 at age 55. I have chosen the TR 2020.

The only two adjustements I have made was to add REIT (VNQ) and beefed up my international exposure in my taxable account. I like the simplicity.
Last edited by marshall on Sat Feb 16, 2008 7:39 am, edited 1 time in total.

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Post by astroturf » Sat Feb 16, 2008 7:37 am

Thanks, you saved me a lot of time since I was planning to do something like this myself.

Most interesting to me is their use or TIPS. Something to think about. Any ideas?

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Post by unclemick » Sat Feb 16, 2008 11:30 am

bob u. wrote:Take a look at Vanguard's institutional take on target funds. It's the first article in the following link. https://institutional.vanguard.com/iip/ ... PF2007.pdf Bob U.

Also: here's a link to Bill Bernstein's take. http://www.efficientfrontier.com/ef/404/grail.htm
Thanks Bob - good articles.

Handgrenade wise - the Vanguard article(new to me) confirms my prejudices - now that I'm close to 65, retired and all.

Bernstein(had read before) would have interested me more in the 1980's my 'multi asset heyday' - read slice and dice.

OLD age - buy whole markets and putz with a few individual stocks for entertainment. I'll leave the finer points of theory 'whole vs slice and dice' to a younger generation.

heh heh heh

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Post by astroturf » Sat Feb 16, 2008 12:09 pm

bob u. wrote:Take a look at Vanguard's institutional take on target funds. It's the first article in the following link. https://institutional.vanguard.com/iip/ ... PF2007.pdf Bob U.

Also: here's a link to Bill Bernstein's take. http://www.efficientfrontier.com/ef/404/grail.htm
I had a question about the use of TIPS in the target retirement funds. Basically they are not used after the 2010 fund, meaning, 2015 no TIPS, and so on.

The Vanguard paper does give me an explanation, but in a different article. On page 22 the "Evolving US Inflation Dynamics" article says in its conclusion, page 27:
The inflation-hedging properties of Treasury Inflation-
Protected Securities (TIPS), on the other hand, are
invariant to changes in inflation dynamics. This is
because the return of TIPS provides compensation
for actual realized CPI inflation, regardless of the
source of the CPI volatility. Of course, over longer
investment horizons, stocks have proven to be the
most effective inflation hedge by generating positive
long-term returns well above the rate of inflation.
So they rather allocate to stocks than to TIPS for inflation hedging if the time horizon is about 5 or more years.

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Bob U.

Post by pkcrafter » Sat Feb 16, 2008 12:32 pm

Bob U.,

Thank you for that most interesting link from Vanguard. While the article on the TR funds is interesting, the one on the efficient frontier is, I think, a major story worthy of it's own post. I will open a new discussion on it. the link also contains note worthy studies on REITs and investor emotional intelligence and behavior.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

Levett
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Post by Levett » Sat Feb 16, 2008 12:56 pm

Hi Unclemick and Paul, gentlemen both:

That particular research, along with Rick's proposed four core (which I call "Four Corners" given my love of basketball), convinced me to stick with a slightly modified version of Rick's discussion. The latter works best for my EI (however much Emotional Intelligence I may possess!), as well as my GI (gastrointestinal system :roll: ) Bob U.

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NoMoreInvestingExcitement
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Post by NoMoreInvestingExcitement » Sat Feb 16, 2008 2:19 pm

Random Musings wrote:Most important choice of one's allocation stocks/bonds at any time should be distilled down to one's need of risk.

Hence, the "glide" over time may not properly benchmark with need of risk.

RM
That kind of rings true with me, as well.

More specifically, I see my portfolio in light of my own particular and varied set of circumstances, which are, well, just too particular for me to feel at ease using TRF's as my AA benchmark.

Nisiprius's comment about taking a peek at them periodically to see if you're very far off the TRF AA for your indended retirement date is not a bad suggestion though. At least that puts you in the position of reminding yourself why you're on your particular course.

Thanks,
NMIE
Unlimited online financial info's great, but I'd rather my compass just kept working.

Doc7
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Post by Doc7 » Wed Feb 20, 2008 8:35 pm

My lowly $9,000 in Roth IRA is too small to appropriately diversify, so I use a combination of Target Retirement 2015 and my Roth 401(k) (double bonus; it's a Roth, and I get Vanguard Institutional shares in everything but bonds) to keep a 60/40 stock/bond allocation.

f.w.i.w, I'm 23.

Can you tell I think TR is too aggressive?

I plan on re-reading Four Pillars, and reading All About Asset Allocation, which has been on my bookshelf for literally months, and most likely re-adjusting to 70/30 or 65/35, as well as probably expanding more internationally (currently 20% of stocks) on my 25th birthday. Until then, I just am gonna keep pumping in the match amount to 401k and the max contribution for Roth IRA.

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market timer
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Post by market timer » Wed Feb 20, 2008 8:40 pm

Doc7 wrote:Can you tell I think TR is too aggressive?
So, you have $5400 invested in stocks in 2008. Maybe you'll have $10K invested in stocks next year, and $15K the following year. Why not just put the whole $9K in stocks now and move additional savings to bonds? Otherwise, you seem to be betting that 2010 will offer better returns than 2008, given that you haven't diversified across time as much as you could.

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sgr000
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Article on Target Date Folios

Post by sgr000 » Wed Mar 26, 2008 9:22 pm

Here's a related article discussing target-date retirement portfolios of ETFs, constructed for FOLIOfn. Reasonably similar to Vanguard Target Retirement, at least in spirit.

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ken250
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Post by ken250 » Thu Mar 27, 2008 8:50 am

I use a model presented by Stein & DeMuth, based on:

1) Dividend-paying stocks
2) REITs
3) TIPS
4) Bonds.

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