Are you using Vanguard's all-in-one funds?

[wbenutley]

Vanguard is at it again… slashing expenses to give us a better deal. Today they announced the reduction of operating expenses on 53 of their funds. Most of these are actively-managed (not my favorite). However, I was intrigued to see that the OERs on 12 of their Target Retirement funds dropped by us much as 17%. Wow!

Based on my experience, physicians are overlooking these all-in-one, never-ever-rebalance-again, fire-and-forget funds that are a good fit for do-it-yourselfers.

Do you use Vanguard’s target date funds? What do you like about them? If you’re not using them, why not? What do you like better?

[Kennyt7]

TDF are not diversified enough imho

[RadDoc]

I agree. Not enough small caps in the target date funds especially the ones with long term targets.

[wbenutley]

Well said RadDoc. And they lack a value tilt, too. I haven’t seen target date funds with small and value tilts.

[Joseph]

No.  I consider them "training wheels"...that you have to pay extra for.  Doesn't make sense to me at this point.

[The White Coat Investor]

I use them in my kids' Roth IRAs.

[jfoxcpacfp]

The White Coat Investor wrote:

I use them in my kids’ Roth IRAs.

Click to expand...

What is the purpose of owning a fund with any allocation to bonds in a child's portfolio? Unless there is one I am missing, which is totally possible.

[jz]

jfox above "   What is the purpose of owning a fund with any allocation to bonds in a child's portfolio?"

The same purpose of including bonds in any portfolio:  to dampen volatility.

Your view disregards the psychology of investing.

[jfoxcpacfp]

Why do you need to dampen volatility - at the expense of returns - when you don't need the money for 10 - 18 years (529 accounts) or even longer (child Roth IRAs)? There seems to be a disconnect for some investors on this forum. "Stay the course" is absolutely correct when the market is down but you are now talking about the psychology of investing as if the participants on WCI are ignorant of these principles. Given that volatility is the long-term driver of returns, why would you need to dampen volatility for long-term investments? Of course, if you don't own an appropriately balanced equity mutual fund/ETF portfolio, rebalanced annually, all of that goes out the window and we have a more fundamental concern.

If an investor cannot control behavior and cannot appropriately manage a portfolio for optimum long-term growth and income, that is what I get paid to do. You could do much worse than the average annual long-term gains in the equity market, but, of course, it only works with a plan in place.

[Joseph]

jfoxcpacfp wrote:

What is the purpose of owning a fund with any allocation to bonds in a child’s portfolio? Unless there is one I am missing, which is totally possible.

Click to expand...

Hey Johanna.... You keep switching your "name" and signature.  

Anyways, come to think of it: I also have Target funds for my kids' Roths for the simple fact that there is a low $1000 to open them and they haven't earned enough to go admiral TSM yet.

[jfoxcpacfp]

Joseph wrote:

jfoxcpacfp wrote:

What is the purpose of owning a fund with any allocation to bonds in a child’s portfolio? Unless there is one I am missing, which is totally possible. 

Click to expand…

Hey Johanna…. You keep switching your “name” and signature.  " />

Anyways, come to think of it: I also have Target funds for my kids’ Roths for the simple fact that there is a low $1000 to open them and they haven’t earned enough to go admiral TSM yet.

Click to expand...

Thanks for bringing that up - I have noticed it, too, and it's nothing I am doing. I change the tag line about once a week, but I don't know what's going on with the name - a glitch?

A low minimum for a TDF would be a reason to get into the market but hopefully not for long.

[The White Coat Investor]

Joseph wrote:

jfoxcpacfp wrote:

What is the purpose of owning a fund with any allocation to bonds in a child’s portfolio? Unless there is one I am missing, which is totally possible. 

Click to expand…

Hey Johanna…. You keep switching your “name” and signature.  " />

Anyways, come to think of it: I also have Target funds for my kids’ Roths for the simple fact that there is a low $1000 to open them and they haven’t earned enough to go admiral TSM yet.

Click to expand...

Exactly. What do you recommend I invest $1K in?

[jfoxcpacfp]

I'd start with 1/3 LC blend, 1/3 SC blend, 1/3 Intl ETF index's with minimum waived for monthly contributions or low minimums.

[The White Coat Investor]

You realize I'm managing 30-40 529s, 6 Roth IRAs, 4 401(k)s, and two taxable accounts, right? Additional complexity isn't something I need in a $1000 account. I'm not going to buy 3 ETFs in such a tiny account to avoid the "drag" from having $100 in bonds. Using ETFs would require 12 trades a year (not counting the dividend reinvestments) for those four Roth IRAs. This is a great use for a target retirement fund in my view. Heck, the drag from the bonds is probably less than the drag from the cash that would need to be in the account if I were using ETFs.

Plus, I'm not nearly as anti-bond as you seem to be.

To the OP, there are lots of reasons why docs maybe shouldn't use a target retirement fund. I discussed them here:

https://www.whitecoatinvestor.com/7-reasons-i-dont-use-target-retirement-funds/

But if your only investing account is a single Roth IRA, I think they're just fine.

[jfoxcpacfp]

The White Coat Investor wrote:

You realize I’m managing 30-40 529s, 6 Roth IRAs, 3 401(k)s, and two taxable accounts, right? Additional complexity isn’t something I need in a $1000 account. I’m not going to buy 3 ETFs in such a tiny account to avoid the “drag” from having $100 in bonds. Using ETFs would require 12 trades a year (not counting the dividend reinvestments) for those four Roth IRAs. This is a great use for a target retirement fund in my view. Heck, the drag from the bonds is probably less than the drag from the cash that would need to be in the account if I were using ETFs.

Plus, I’m not nearly as anti-bond as you seem to be.

To the OP, there are lots of reasons why docs maybe shouldn’t use a target retirement fund. I discussed them here:

https://www.whitecoatinvestor.com/7-reasons-i-dont-use-target-retirement-funds/

But if your only investing account is a single Roth IRA, I think they’re just fine.

Click to expand...

Well, no. I thought I was just answering a simple question for the general readership. I'm not anti-bond, just like for them to be used appropriately.