6 ms·

Because...

by zzalpha 11y ago

Because...

yummyfajitas 11y ago
Vanguard Target Retirement 20XX tend to shift from high growth, high vol into low growth, low vol towards the end of their lifetime. This reduces your risk of a big stock market downswing hurting you just before you retire.
- gruez 11y ago
  I did a search of Vanguard Target Retirement funds on google and came upon this[1] criticism of target retirement funds, as the second result. In short, it argues that target retirement funds are more costly than do-it-yourself funds, and you can halve your fees with a DIY portfolio. Thoughts? [1]http://www.forbes.com/sites/baldwin/2013/06/05/the-trouble-with-target-funds/ http://www.forbes.com/sites/baldwin/2013/06/05/the-trouble-w...
  - kasey_junk 11y ago
    I've spent over a decade in finance and barely feel justified in an investment strategy beyond "target fund". Everything in that article is true, but immaterial. The vast majority of retirement investment strategies are beaten by target funds. Unless you are sure you are the exception you can do much worse than a low fee target fund.
    - deleted 11y ago
      [deleted]
  - yummyfajitas 11y ago
    This is roughly what I do, but 99% of investors aren't capable of managing their own investments. Target retirement funds are "set it and forget it". I do, however, have a smallish vanguard target retirement fund left over from my academic days. It's actually performing pretty well.
    - jgalt212 11y ago
      Exactly this > "set it and forget it". Even though the fees for Vanguards targeted retirement date fees are much higher than a weighted average of one of their money market and index funds, these fees are still really low and as such, the "set it and forget it" function is very useful and valuable (certainly when considered in a behavioral economics framework where one may not be as disciplined with re-balancing as the models indicate).
  - arielweisberg 11y ago
    I would classify that as FUD. The article complains that Vanguard's 10x less expensive wrapper fund isn't as inexpensive as buying separate Admiral's share versions of their index funds. They neglect to mention the minimum investment amounts for Admiral shares nor the risk of behavioral or technical errors rebalancing that could eat away any gains you might get from maintaining a fund mix yourself across several accounts. This actually happened to me and wiped away a few months of gains. I personally keep separate funds, but I do it because I have many accounts with varyings amounts of money and need to maintain an asset allocation across all of them. Retirement funds make that hard as does lack of fund choice in many accounts. For people not willing or stressed out by managing their money, wrapper funds offered by Vanguards are a great option that shouldn't be confused with other target retirement funds that are based on active trading strategies. In the future it's possible they will make an Admiral version.
  - pbreit 11y ago
    Not the best article. The Blackrock portion is irrelevant. Regarding piecing together your own Vanguard portfolios, you might be able to save a few basis points. You'd also have to do the rebalancing yourself and I'm not sure the tax implications of rebalancing.
  - sandstrom 11y ago
    Sure, you could go cheaper by doing it yourself. But for financially illiterate -- that is, most people -- it's a good choice. Fees are fair too, nothing outrageous or deceitful (as is often the case in this industry).
- walshemj 11y ago
  Unless you have a bond/guilt crash (one is due) and you can lose 30-40% of these safe inventments
  - a8da6b0c91d 11y ago
    Whenever this retirement finance stuff comes up people mostly just extrapolate USA markets from 1982 forward, or maybe at best something like 1919 USA markets. I don't think history is so linear for this to be useful.
  - tcbawo 11y ago
    If you can survive on the interest, the price of the underlying bond itself is not as important.
    - jgalt212 11y ago
      Except that doesn't work so well right now b/c most sovereign bond yields are negative, or very close to negative, on an inflation adjusted basis.
    - evanpw 11y ago
      This is both true and false: a fall in the price of a bond reflects opportunity costs. An example: you buy a brand-new MacBook Pro (bond) today for $1800. The next day, Apple cuts the price of the exact same model by 30% to $1260 (interest rates rise, bond prices falls). On the one hand, you have exactly the same computer you had on the previous day (same stream of interest payments), so you could say that you haven't lost anything. On the other hand, if you'd waited a day, you could have gotten exactly the same thing for $540 less, so you could say that you're out that amount. And if you fall on hard times and need to sell the computer, no one will be willing to pay you $1800 for it, since they can buy it from Apple for much less, so in that case the opportunity cost becomes an explicit cost.
      - walshemj 11y ago
        Err no you will have lost 30% or so of the value of the bond portion of your pension fund/ investments. BTW the last bond crash was around 30% loss in a very short period.
pbreit 11y ago
The main reasons for the LifeStrategy: 1) simple but solid diversification in stocks, bonds and international, 2) transitions over time to more conservative portfolio as you would want when you're nearing retirement and the biggest 3) low fees of just %0.16. For pretty much every retail investor, this is a very prudent approach for a core holding.

Because...

by zzalpha 11y ago

Because...

Vanguard Target Retirement 20XX tend to shift from high growth, high vol into low growth, low vol towards the end of their lifetime. This reduces your risk of a big stock market downswing hurting you just before you retire.

gruez 11y ago
I did a search of Vanguard Target Retirement funds on google and came upon this[1] criticism of target retirement funds, as the second result. In short, it argues that target retirement funds are more costly than do-it-yourself funds, and you can halve your fees with a DIY portfolio. Thoughts? [1]http://www.forbes.com/sites/baldwin/2013/06/05/the-trouble-with-target-funds/ http://www.forbes.com/sites/baldwin/2013/06/05/the-trouble-w...
- kasey_junk 11y ago
  I've spent over a decade in finance and barely feel justified in an investment strategy beyond "target fund". Everything in that article is true, but immaterial. The vast majority of retirement investment strategies are beaten by target funds. Unless you are sure you are the exception you can do much worse than a low fee target fund.
  - deleted 11y ago
    [deleted]
- yummyfajitas 11y ago
  This is roughly what I do, but 99% of investors aren't capable of managing their own investments. Target retirement funds are "set it and forget it". I do, however, have a smallish vanguard target retirement fund left over from my academic days. It's actually performing pretty well.
  - jgalt212 11y ago
    Exactly this > "set it and forget it". Even though the fees for Vanguards targeted retirement date fees are much higher than a weighted average of one of their money market and index funds, these fees are still really low and as such, the "set it and forget it" function is very useful and valuable (certainly when considered in a behavioral economics framework where one may not be as disciplined with re-balancing as the models indicate).
- arielweisberg 11y ago
  I would classify that as FUD. The article complains that Vanguard's 10x less expensive wrapper fund isn't as inexpensive as buying separate Admiral's share versions of their index funds. They neglect to mention the minimum investment amounts for Admiral shares nor the risk of behavioral or technical errors rebalancing that could eat away any gains you might get from maintaining a fund mix yourself across several accounts. This actually happened to me and wiped away a few months of gains. I personally keep separate funds, but I do it because I have many accounts with varyings amounts of money and need to maintain an asset allocation across all of them. Retirement funds make that hard as does lack of fund choice in many accounts. For people not willing or stressed out by managing their money, wrapper funds offered by Vanguards are a great option that shouldn't be confused with other target retirement funds that are based on active trading strategies. In the future it's possible they will make an Admiral version.
- pbreit 11y ago
  Not the best article. The Blackrock portion is irrelevant. Regarding piecing together your own Vanguard portfolios, you might be able to save a few basis points. You'd also have to do the rebalancing yourself and I'm not sure the tax implications of rebalancing.
- sandstrom 11y ago
  Sure, you could go cheaper by doing it yourself. But for financially illiterate -- that is, most people -- it's a good choice. Fees are fair too, nothing outrageous or deceitful (as is often the case in this industry).
walshemj 11y ago
Unless you have a bond/guilt crash (one is due) and you can lose 30-40% of these safe inventments
- a8da6b0c91d 11y ago
  Whenever this retirement finance stuff comes up people mostly just extrapolate USA markets from 1982 forward, or maybe at best something like 1919 USA markets. I don't think history is so linear for this to be useful.
- tcbawo 11y ago
  If you can survive on the interest, the price of the underlying bond itself is not as important.
  - jgalt212 11y ago
    Except that doesn't work so well right now b/c most sovereign bond yields are negative, or very close to negative, on an inflation adjusted basis.
  - evanpw 11y ago
    This is both true and false: a fall in the price of a bond reflects opportunity costs. An example: you buy a brand-new MacBook Pro (bond) today for $1800. The next day, Apple cuts the price of the exact same model by 30% to $1260 (interest rates rise, bond prices falls). On the one hand, you have exactly the same computer you had on the previous day (same stream of interest payments), so you could say that you haven't lost anything. On the other hand, if you'd waited a day, you could have gotten exactly the same thing for $540 less, so you could say that you're out that amount. And if you fall on hard times and need to sell the computer, no one will be willing to pay you $1800 for it, since they can buy it from Apple for much less, so in that case the opportunity cost becomes an explicit cost.
    - walshemj 11y ago
      Err no you will have lost 30% or so of the value of the bond portion of your pension fund/ investments. BTW the last bond crash was around 30% loss in a very short period.

pbreit 11y ago

The main reasons for the LifeStrategy: 1) simple but solid diversification in stocks, bonds and international, 2) transitions over time to more conservative portfolio as you would want when you're nearing retirement and the biggest 3) low fees of just %0.16. For pretty much every retail investor, this is a very prudent approach for a core holding.