7 reasons I DO use a target retirement fund

[docnews]

Plus you said this takes 2 hours per year (not to mention this website management's countless hours of self-education) to make investment decisions. If you spent that time working as an ED doc (as stressful as it is) you will probably negate most of the reward of your own "targeting".

[docnews]

-Plus you said this takes 2 hours per year (not to mention this website management's countless hours of self-education) to make investment decisions.

[docnews]

Plus you said this takes 2 hours per year, not to mention this website management's countless hours of self-education, to make investment decisions.

[docnews]

Plus you said this takes two hours per year (not to mention this website management's countless hours of self-education) to make investment decisions. If you spent that time working as an ED doc (as stress as it is) you will probably negate most of the reward of your own "targeting".

[docnews]

Basically I'm intrigued by cheap Target funds because it takes the #1 danger (ME) out the equation in two more ways (indexing already removing my guessing the market):
1) Rebalancing
2) Gliding"

 

Do you use Vanguard Target Funds?

[docnews]

Basically I'm intrigued by cheap Target funds because it takes the #1 danger (ME) out the equation in two more ways (indexing already removing my guessing the market):
1) Rebalancing
2) Gliding"

Do you use Vanguard Target Funds?

[docnews]

Basically I'm intrigued by cheap Target funds because it takes the #1 danger (ME) out the equation in two more ways (indexing already removing my guessing the market):
1) Rebalancing
2) Gliding"

[docnews]

"P1 with Accounts: Since I'm a beginner (aka intern, just like when you started this investing adventure) this is not been a problem for me yet and from reading your blog I've noted that 401ks often offer Target funds but NOT other index options.

P2 with Dates: I don't see the issue here. I just need to decide the year in which I want my retirement to tip towards conservative (50% equity / 50% fixed income at the year in the name). With your plan, you have to decide the same thing but you have to manage the glide.

P3 with Glide: You seem to indicate you will try to "time" your glide. Isn't that why indexing and rebalancing concepts were created to avoid timing the market? Won't you be tempted to wait starting your glide if your retirement comes at the same time as a bubble? If you plan a glide and stick it to it you should be fine but it sounds like you haven't set it in stone just yet.

P4 with Allocation: Though I understand the concept of diversification, I don't fully comprehend this concept of tilting. To me, it feels like tinkering, bordering on guessing the market. Surely when I invest in the Total Stock Market I am investing in the small cap as well. I understand that the Total Stock Market could be deemed "tilted" towards large cap but isn't that just the reality of the full market that has more stable returns? Basically you stated you would be okay financially if these riskier allocations relatively flopped but your gambling for a few extra percentage points on your ROI. Is that a fair statement? Call me conservative but I want to get "rich" slow and steady.

P5 with Managers: This problem makes sense to me. Managed indexing does seem like an oxymoron, but I don't think the managers will get many investors if they do more than balance and follow the plan proposed. Your critique of adding international bonds falls a little flat when your own investment plan has ballooned to include new allocations as you become more well read. If a Target Fund ever announced a major change that profited the company providing the fund, I would jump ship so quick they wouldn't get a cent.

P6 with Tax Efficiency: Since this is not a problem for you, I doubt it will be a problem for me. You posted that even you (with your wise savings) were not able to maximize your tax havens and had no taxable investment accounts. I'm still trying to wrap my mind around the $50k 401k but I will look for this possibility during my job searches on its own merits.

P7 with Costs: This is the one where you really could change my mind. But then I saw your "usually" hiding behind parentheses so I did some research. Vanguard Target fund expense ratios are 0.18%. You have a lot to be proud of by setting up a plan with 0.16%. Are you sure you haven't made 2 base points worth of errors? How about your delay in rebalancing in comparison to the funds continual rebalancing? Or a slight delay in investment do to complications or adjustments necessary with 5 accounts? Granted you are probably really on top of these things but the average doc is likely to make some costly error/delay along their 'investing career' (including me). Plus you said this takes 2 hours per year (not to mention this website management's countless hours of self-education) to make investment decisions. If you spent that time working as ED doc (as stressful as it is) you will probably negate most of the reward of your own "targeting".

Basically I'm intrigued by cheap Target funds because it takes the #1 danger (ME) out the equation in two more ways (indexing already removing my guessing the market):
1) Rebalancing
2) Gliding"

[docnews]

"P1 with Accounts: Since I'm a beginner (aka intern, just like when you started this investing adventure) this is not been a problem for me yet and from reading your blog I've noted that 401ks often offer Target funds but NOT other index options.

P2 with Dates: I don't see the issue here. I just need to decide the year in which I want my retirement to tip towards conservative (50% equity / 50% fixed income at the year in the name). With your plan, you have to decide the same thing but you have to manage the glide.

P3 with Glide: You seem to indicate you will try to "time" your glide. Isn't that why indexing and rebalancing concepts were created to avoid timing the market? Won't you be tempted to wait starting your glide if your retirement comes at the same time as a bubble? If you plan a glide and stick it to it you should be fine but it sounds like you haven't set it in stone just yet.

P4 with Allocation: Though I understand the concept of diversification, I don't fully comprehend this concept of tilting. To me, it feels like tinkering, bordering on guessing the market. Surely when I invest in the Total Stock Market I am investing in the small cap as well. I understand that the Total Stock Market could be deemed "tilted" towards large cap but isn't that just the reality of the full market that has more stable returns? Basically you stated you would be okay financially if these riskier allocations relatively flopped but your gambling for a few extra percentage points on your ROI. Is that a fair statement? Call me conservative but I want to get "rich" slow and steady.

P5 with Managers: This problem makes sense to me. Managed indexing does seem like an oxymoron, but I don't think the managers will get many investors if they do more than balance and follow the plan proposed. Your critique of adding international bonds falls a little flat when your own investment plan has ballooned to include new allocations as you become more well read. If a Target Fund ever announced a major change that profited the company providing the fund, I would jump ship so quick they wouldn't get a cent.

P6 with Tax Efficiency: Since this is not a problem for you, I doubt it will be a problem for me. You posted that even you (with your wise savings) were not able to maximize your tax havens and had no taxable investment accounts. I'm still trying to wrap my mind around the $50k 401k but I will look for this possibility during my job searches on its own merits.

P7 with Costs: This is the one where you really could change my mind. But then I saw your "usually" hiding behind parentheses so I did some research. Vanguard Target fund expense ratios are 0.18%. You have a lot to be proud of by setting up a plan with 0.16%. Are you sure you haven't made 2 base points worth of errors? How about your delay in rebalancing in comparison to the funds continual rebalancing? Or a slight delay in investment do to complications or adjustments necessary with 5 accounts? Granted you are probably really on top of these things but the average doc is likely to make some costly error/delay along their 'investing career' (including me). Plus you said this takes 2 hours per year (not to mention this website management's countless hours of self-education) to make investment decisions. If you spent that time working as a ED doc (as stressful as it is) you will probably negate most of the reward of your own "targeting".

Basically I'm intrigued by cheap Target funds because it takes the #1 danger (ME) out the equation in two more ways (indexing already removing my guessing the market):
1) Rebalancing
2) Gliding"

[scbunker]

docnews wrote:

Kenneth Tobin wrote:

Not diversified enough

Click to expand…

In what way?

One way: you can't manage asset allocation well if you have multiple accounts.

For example, I have a 401(k) through my current employer with some unheard-of organization. My wife has 403(b) with Vanguard. We each have a Roth with Vanguard. Fees in my 401(k) are quite high except for the 500 fund which is an actually-quite-impressive 0.05%. Because I don't want to pay the high fees of the other funds, my 401(k) is 100% in the 500 fund. That means I have to skew our other investment accounts away from large cap in order to keep our overall asset allocation where it needs to be.

Yes, Vanguard's target funds are the best the industry has, but if I used them, I'd either have to be large-cap heavy or pay extra high fees to maintain my asset mix in my 401(k).

I was actually in a Vanguard target fund before I began working for this employer. It's just not doable now.

[scbunker]

docnews wrote:

Kenneth Tobin wrote:

Not diversified enough

Click to expand…

In what way?

You can't manage asset allocation well if you have multiple accounts. For example, I have a 401(k) through my current employer with some unheard-of organization. My wife has 403(b) with Vanguard. We each have a Roth with Vanguard. Fees in my 401(k) are quite high except for the 500 fund which is an actually-quite-impressive 0.05%. Because I don't want to pay the high fees of the other funds, my 401(k) is 100% in the 500 fund. That means I have to skew our other investment accounts away from large cap in order to keep our overall asset allocation where it needs to be.

Yes, Vanguard's target funds are the best the industry has, but if I used them, I'd either have to be large-cap heavy or pay extra high fees to maintain my asset mix in my 401(k).

For the record, I was in a Vanguard target fund before I began working for this employer. It's just not doable now.

[necrotic]

I'm using one now as it is one of the cheapest funds offered in my 401k. One of the downsides in my opinion is that these funds stay at their asset allocation consistently and rebalance to do so.  There is some evidence out there that the "momentum effect" is real and that by rebalancing only once a year or two (or when out of your allocation bracket by more than 5% for example) you may have better long term returns by letting the winners win for a little while. However, I'm sure that human error can creep in and you might end up making small errors.  Also, many of these funds have dampened volatility and will not yield as many opportunities for tax loss harvesting.

[docnews]

The main argument it seems is that one's work retirement accounts do not have Vanguard Target Funds as an option. As an independent contract I have the joy/responsibility of setting up my own retirement accounts and can make them as simple and as large as they can legally be. But if you have a W2 don't fret since Vanguard Target Funds are becoming more frequently one of the options. Sadly 401ks made by employers still have great limitations.

The secondary argument is the lack of the ability to tilt which no one has convinced me which way to tilt is best so I label that as macro "guessing the market" (versus micro "guessing the market" aka stock picking).

The tertiary argument is "Where is the real estate, commodities, or alternatives?". My response is two fold. First, indirectly you are investing in all alternatives by buying companies that own and use the above. Secondly, how does a Target Fund stop you from buying some of these on the side?

Maybe some of my thinking is simplistic but I think these funds are actually complexly logically sound, so (if able) why not just go all the way for these funds, cheap both in time cost of the personal management and expense ratios of the professional management.

[docnews]

~The main argument it seems is that one's work retirement accounts do not have Vanguard Target Funds as an option. As an independent contract I have the joy/responsibility of setting up my own retirement accounts and can make them as simple and as large as they can legally be. But if you have a W2 don't fret since Vanguard Target Funds are becoming more frequently one of the options. Sadly 401ks made by employers still have great limitations.

The secondary argument is the lack of the ability to tilt which no one has convinced me which way to tilt is best so I label that as macro "guessing the market" (versus micro "guessing the market" aka stock picking).

The tertiary argument is "Where is the real estate, commodities, or alternatives?". My response is two fold. First, indirectly you are investing in all alternatives by buying companies that own and use the above. Secondly, how does a Target Fund stop you from buying some of these on the side?

Maybe some of my thinking is simplistic but I think these funds are actually complexly logically sound, so (if able) why not just go all the way for these funds, cheap both in time cost of the personal management and expense ratios of the professional management.

[docnews]

-The main argument it seems is that one's work retirement accounts do not have Vanguard Target Funds as an option. As an independent contract I have the joy/responsibility of setting up my own retirement accounts and can make them as simple and as large as they can legally be. But if you have a W2 don't fret since Vanguard Target Funds are becoming more frequently one of the options. Sadly 401ks made by employers still have great limitations.

The secondary argument is the lack of the ability to tilt which no one has convinced me which way to tilt is best so I label that as macro "guessing the market" (versus micro "guessing the market" aka stock picking).

The tertiary argument is "Where is the real estate, commodities, or alternatives?". My response is two fold. First, indirectly you are investing in all alternatives by buying companies that own and use the above. Secondly, how does a Target Fund stop you from buying some of these on the side?

Maybe some of my thinking is simplistic but I think these funds are actually complexly logically sound, so (if able) why not just go all the way for these funds, cheap both in time cost of the personal management and expense ratios of the professional management.