TDF
Templeton Dragon Closed Fund
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Is the expense difference between these two funds significant enough to steer the decision?
Target Date Funds (TDF) in Taxable Account for Money Needed in 4-5 Years?
Anything wrong with investing into TDF for both 401k and IRAs?
How to diversify between small cap, mid cap, large cap and international
should I dedicate all my investment accounts towards a TDF or dedicate one to a TDF and the other to funds?
How can you protect your 401k & IRAs from inflation/recession if you have TDF?
Target Date Fund (TDF) Okay for 401k, Traditional IRA & Roth IRA?
convert target date fund to my custom build fund in Roth IRA
Target Date Fund (TDF) for Traditional IRA and Roth IRA a good investment?
TDF or Index Fund for Traditional IRA and Roth IRA?
Is a Target Date Fund (TDF) okay for Traditional IRA and/or Roth IRA?
Having TDF for 401k during downturn/recession?
Can somebody explain why a target-date retirement fund is a good idea? Seems terrible to me
2065 Schwab TDF or VTI? 23 y/o Planning to retire at 62 (2061)
All About Asset Allocation and Protecting Your Wealth book summary by Richard Ferri
Is it okay to invest in similar Target Date Funds with different brokers?
How much of your portfolio is individuals stocks vs ETFs?
Should I move the money in my IRA out of Scwabs TDF and into the S&P?
Mentions
The average dude who just automatically contributes to a TDF in his 401k has been doing just fine. Only gambling regards are losing money in this market.
>but then Iwas told I need to get bonds to balance things out How old are you? You don't need bonds till you're older. And you can easily manage 2-3 funds yourself, just use 1 fund if you're young, or just do the passive TDF. You don't need any active funds.
2060 TDF. They are the safest investment with decent returns
I would like to buy a luxury watch. I can afford it. However, I will likely have to wait 6 months to a year to actually purchase the watch. Maybe longer. I’d like to just park the funds in a separate brokerage account while I wait. However, I don’t mind taking some risk since it can wait. Rolling a couple of options in my head. I considered a lower-beta index ETF, something like SCHD. Another alternative is to just mimic a TDF allocation for say, 2027. Would consider a bond fund or even using the money (about $8k) to run some wheel strategies. I really don’t want to just have the cash sitting there in a MMF or HYSA since I’d rather not miss the opportunity cost of being totally out of the market than not miss the watch. All my serious savings/retirement is in global index ETFs. I’m an experienced investor just looking for some opinions!
I’m almost positive there is a pre-determined structure that accounts for when/how the mix is rebalanced which is based on years left to target date - shifting more towards bonds as time approaches the TD of the TDF. As you mentioned these are probably meticulously poured over at inception but what you’re describing is introduction of a new asset class based on prevailing (and speculative) market conditions, that usually are transitory. If that were the case, the argument could be made that they fucked their clients over by not buying bitcoin, as it far outperformed any asset class since inception. But that’s not how these are designed, packaged, and sold to their clients. What you’re describing is an actively managed fund - which require higher fees, higher asset turnover, and introduce unpredictability and added risk to their clients. Do TDFs underperform in melt up bull markets? Absolutely. But they sacrifice returns for consistency because that’s what they’re selling: a product that, regardless of market conditions, their clients will have a fair, risk-adjusted return by the TD. If they didn’t achieve this… well there would be no vanguard Ret 2060 funds TLDR - TDFs emphasizes low costs, pre-hedged, pre-defined roadmap based primarily on a persons age til retirement, rather than reacting to cyclical market conditions
I’m almost positive there is a pre-determined structure that accounts for when/how the mix is rebalanced which is based on years left to target date - shifting more towards bonds as time approaches the TD of the TDF. As you mentioned these are probably meticulously poured over at inception but what you’re describing is introduction of a new asset class based on prevailing (and speculative) market conditions, that usually are transitory. If that were the case, the argument could be made that they fucked their clients over by not buying bitcoin, as it far outperformed any asset class since inception. But that’s not how these are designed, packaged, and sold to their clients. What you’re describing is an actively managed fund - which require higher fees, higher asset turnover, and introduce unpredictability and added risk to their clients. Do TDFs underperform in melt up bull markets? Absolutely. But they sacrifice returns for consistency because that’s what they’re selling: a product that, regardless of market conditions, their clients will have a fair, risk-adjusted return by the TD. If they didn’t achieve this… well there would be no vanguard Ret 2060 funds
Thank you for the response. Yes, this is money that he doesn’t need, and he does not spend a lot in retirement as it is. A TDF is a good idea. I guess the family has just helped him decide that stocks/ETFs is where his risk tolerance lies for this money, to allow more potential gains on it. So if we’re only talking stocks, it’s good to hear a second vote for VT. But I could float the TDF as an idea since it would also make sense, and I’m not sure if something like that has been seriously considered.
This is not weak at all. If you max out the 401(k), your company is giving you $5,875. It’s not the greatest in the world but it’s solid. You should expect about 10% growth on average, per year in an S&P 500 fund. The 401(k) match is far better than that. Now the question is - what investment options are in your 401(k) plan. Even if the options have high ER’s, the match negates it by a lot. You’ve presumably got something akin to an S&P 500 fund in your 401(k). If not, there’s probably a TDF or total market fund or combination of funds that could be put together to meet your goals. Please do the 401(k) first!
I'm 5 years away from retirement. \~70% of my funds are in 401k's/IRA's. Over the last year, I've shifted away from 80% S&P 500 and moved towards a TDF of 2035, which is currently at about 70% equities. If the trends keep going up, I may move more towards the TDF 2030, which is about 60% equities. I want to make these moves while the markets are going up, not a reaction after its fallen. So far this year, I'm up about 11%.
That's a very subjective question. What I consider conservative may not match what you do. I don't know exactly what 2060 TDF you are invested in, but I looked up VTTSX since you said Vanguard. Taking it as an example, it currently holds about 8,18% bonds. So with a total of around $40k, you'd hold around 4.7% bonds there. For the 2065 TDF, VLXVX also holds around 8.18% bonds. So over all from those two TDFs you're probably holding around 9.7% bonds. *My personal opinion*, that's not very conservative.
During bull markets, TDF would be expected to under perform pure equities due to them having an allocation of bonds. During bear markets, a TDF may decline less due to the same reason.
Yeah, I probably wouldn't go 100%. I will have to see what is best to diversify and allocate. But, I think TDF just isn't doing as well as I thought it would.
Because S&P 500 is more risk. Most people aren't willing to retire on a 100% S&P 500 fund. If you can accept the risk and volatility which comes from 100% equities then it is likely over the next 20 years that will outperform any TDF. TDF are just designed for simplicity and with automatic decreasing risk.
TDFs are designed to create a glide path that reduces sequence of return risk through the few years either side of retirement. This is because retirement has asymmetric risk, being 10% below your income needs is much worse than being 10% above. That SoRR period doesn't move, so you can be more aggressive now, but you need a steeper glide path to a more conservative portfolio later, the later TDF dates won't do that. If you don't want the SoRR / glide path then don't use TDFs at all. Making them 'more aggressive' by changing the date completely defeats the purpose because they still have a glide path but to a different destination. Like going to Florida when you need to go to New York because you like the weather better there.
Well. What I learned from reddit is that 10% bond is really not necessary for people in 20s or 30s. Most TDF has at least 10% bonds. But everyone's risk tolerance is different
>If you want to be hands-on, you could build a simple mix of broad index funds (like U.S. total market, international, and maybe a small slice of bonds). You could, but that's already what a 2065 tdf is going to have done, so it's extra work for no real gain. We don't know which fund specifically GP has, but looking at [the TDF index](https://www.callan.com/target-date-index/) 2065 funds range from 81% stock at the 10th percentile to 94% at the 90th.
>Otherwise the conservative composition of TDF would be perfect for people in your age. The entire point of TDFs is that their composition is perfect for _any_ age. That's what they do.
Look into the details of the TDF and the other investing options and their past performance. Stock advisors are continually saying that older investors are missing out on gains when moving into more conservative portfolios.
My feeling about TDFs is that they get "too conservative too soon". The worst possible thing that can happen to a TD fund manager is to have a couple of "bad years" as soon as some one retires. To hedge this, most managers and even some target date indexes start to shift to bonds "too early". (You can get around this by going with a TDF whose date is 10 years farther out than you think you want.)
Switch to TDF is you desire to reduce your Return On Investment.
Target date funds handle rebalancing for you, which matters a lot as you get closer to retirement. Doing it yourself with separate funds gives you more control, but it also means keeping up with rebalancing and deciding what to sell when you need cash. If you’d rather not deal with that, then a TDF works.
The problem with TDF is that when you withdraw you cannot choose to withdraw only bonds or equities. Otherwise the conservative composition of TDF would be perfect for people in your age.
A 2035 TDF will still holds considerable equities at 2035, because it's designed for regular withdrawal starting on 2035 for \~30 years. It's not designed for one time withdrawal of 100%. Also usually TDF will still have 10% bonds early. I would lump sum all your initial investment if you have any, and then DCA with your paycheck (if you have any) into VTI/VT/VOO during next 7 years. Then DCA out of the equity in 7 years to HYSA/MMF/SGOV. So in 10 year you would have at least 80% bonds and at most 20% equities.
TDF are fine for anyone who couldn't be arsed or the time to spend to learn how investing works. It's exactly for people in OP's shoes: "noone at my workplace knows anything about how any of this works."
That's a crazy allocation. Holding mostly or all large cap growth funds is just a bad idea, but being 80% equities 20% cash is also a bad idea and having that kind of allocation so close to retirement is also sketchy unless you don't need this money to cover expenses in retirement. Put it all in a 2030 TDF. I hope the majority of the money is in tax advantaged accounts.
I would move out of the bonds and cash and move it to sp500. I would keep the international. and then in 10 years i would shift it back towards the bonds. I think your current TDF is a little too conservative. But like others said, no one really knows.
Nah, you’re not wrong to want more control, but jumping out of a TDF too close to reirement without a plan for how you’ll manage rebalancing, sequencing risk, or tax efficiency could backfre fast. The TDF might be limiting, yeah, but are you ready to DIY the glidepth and handle market swings without a built-in throttle? What’s your plan for keeping your emotons outta the driver’s seat when the market tanks and you’re holding the wheel solo?
Because one plausible scenario is that the stock market drops 20-30% rather quickly, but rebounds in a reasonable length of time. In that situation, it's best to withdraw money from bonds (which presumably are not as badly affected) rather than realizing the paper losses in the equities. If your money is in a TDF, you cannot withdraw anything different from the allocation of that TDF, so you wind up selling equities and locking in your losses. A TDF is fine when you're still in the accumulation phase. When you're in the decumulation phase, it seems best to have more granular control of which assets you sell.
Why not both and tilt towards what you like? For example VOO + TDF and tilt towards the sp500.
You are not wrong. Target date funds are generic. They do not know you and your circumstances. You do. If you want more bonds than the TDF gives, you, then get more. If you want less, then get less. Generic things can have their place, but one size does not fit all.
Well my intent is to implement the bucket strategy, but I realized that a TDF would not work well for that.
Your reasoning is OK as long as you have a reasonable expectation that you're going to actually need the flexibilty, vs. just having an feeling you should be *doing something.* TDF is designed to mantain an "appropriate" ratio, even past the target date. If you've been satisfied with the performance, look up the portfolio and approximate it with individual holdings. You can always go back to the TDF again or keep tabs on its portfolio and rebalance yourself if you don't end up doing what you think you might do.
Because I’m only interested in total market exposure. VTI+VXUS with a spattering of physical real estate and a TDF in my 401(k) for me. I’m about to start layering in bonds too as a get a little closer to retirement. Simple and cheap and diverse.
Your post indicates some fundamental misunderstandings. An etf is just the name of a container, it can contain literally any kind of investment or mix of them. The only way it makes sense to say 70% etfs is if the rest is individual assets or mutual funds and then it's a meaningless goal that says nothing about the types of investments. Targeting dividends is pointless when you're not in the draw down phase. Dividends are equivalent to a forced sale causing unnecessary taxable events which drag on your returns. Best case, if it's in a tax advantaged account that negates the negative impact of dividends, its an arbitrary chunk of the market to target. There's an argument to be made that they're slightly less volatile, but they're still equities. Growth doesn't mean anything to do with increased returns. In this context growth is the opposite of value, those terms refer to the current price relative to what the company is currently worth. Basically, growth means you're paying more than the company is worth right now. Historically growth has returned less than value. Your proposed allocation is some combination of meaningless and contradictory. You should use an all in one solution like a TDF or target allocation fund until you have a better understanding of investing and can make rational decisions about how to allocate your money. Sorry if this came off as harsh, it sounds like your exposure to investing comes from social media finance influencers that have no idea what they're talking about. You have to be careful when taking financial advice you see, it doesn't generalize well as it's all dependent on the context of the scenario being discussed. If you don't understand why a suggestion makes sense in a certain context you can't make a rational decision about whether it's a good idea for you. Mixing and matching random advice that was given convincingly is how you arrive at a conclusion like the nonsense allocation you suggested. You shouldn't listen to anyone that talks about investing in etfs like it's a specific thing, it's like saying that food that comes on a plate is the best kind of food.
It's perfectly fine. A TDF will almost always have fractional shares since it's a mutual fund. An ETF will buy whole shares for that amount and the remaining fractional share will be a separate holding but it's fine too.
Your 2060 TDF is already something like 90% equities. You could pick your own mix but you're already pretty much at max growth, and honestly the amount you can contribute will make more difference than anything for probably the next ~10 years or so.
I’m in the same timeframe, 2-4 years from retirement. Over the past year I shifted most funds from regular index funds to TDF funds. Still left some in index funds. Importantly, all new money is into bond funds (SWAGX & SWRX) to provide an even safer cushion in case things are wonky in retirement year.
Kids are 12 and 10. I have mid five figures (after tax) that I want to preserve principle on for school and living expenses. I want control of the money and don't want to be forced to use it for anything. Before I call a financial advisor, is there anything wrong with buying a TDF 2035 fund and calling it good?
Index funds are absolutely the way to go for 99% of people. Simple. Cheap. Tax efficient options. There are some exceptions in my portfolio - I own 10 individual stocks in my taxable account because I started buying them 20 years ago before I moved to buying 100% index funds. But over the past decade or so, I’ve just been buying 80/20 VTI and VXUS. My current 401(k) match options are fantastic but the fund options are not - so my 401(k) is all in a TDF. But that’s not wildly dissimilar from the 80/20 US/international total market split that I have across my HSA/IRA/Roth/taxable.
Typically I think looking at things regularly is a good way to prime yourself for behavioral mistakes. For most people, the right answer is to invest in a TDF and check in maybe once a decade to see where they're at. The next step is setting your own asset allocation and doing a yearly rebalance. By the time we get to people needing to monitor frequently we're at a very small slice of the population. But if you're there, then you'd know the things you need to care about, right?
That wasn’t my only intention, I didn’t want bonds or cash at my age. For whatever reason vanguard’s TDF’s are not available to me.
*I wanted out of the TDF, exp ratio was .64% I’m around .06% now.* If your sole reason to avoid a TDF was expense ratio and you have access to Vanguard mutual funds, then you can access Vanguard's mutual fund TDFs for a expense ratio of 0.08%.
Way too much overlap and no reason to have a TDF unless you're 100% in it. With your amount stick to 1 fund, either VTI or VOO would be my pick. Also VOOV isn't an S&P 500 fund, it's a S&P 500 Value fund. At your age, look for growth, not value and dividends.
Ah, I see. Afaik, you should be fine rolling the Traditional 401k to a Traditional IRA. If the target date fund is not available at your IRA provider, you may want to see if there is another holding that is available otherwise there will be some selling of the TDF before it gets transferred that you will need to be aware of and what it will entail.
>I only say this because I had a target date fund from my first job and when I left I had about 10k of value in that account. Years and years later it was still at 10k and for some reason it didn't click for a while that the money in that account should be going up, not staying flat. I'm not sure what fund you had or when this was, but no TDF should've performed like this in recent memory. Whatever was happening here is not indicative of TDFs, and you should reconsider your anecdotal experience.
When I was 18-30 years old I tried to look at the fundamentals and understand if it was a company that I could trust to continually grow earnings over the next 40 years or not ~. But I walls traded way too much. I tried to have a weird balance between value and growth. By around age 30 I’d shifted to passive index investing. I buy a TDF in my 401(k) because it’s the best option 80/20 VTI/VXUS in every other account (and an equivalent in mutual funds in my HSA). I basically switched to a Bogle style over the course of a number of years because I realized that it’s quite unlikely that any individual person can beat the broader market. I’ll start adding bonds when I get to about 15 years out from retirement but I’ll keep buying VTI/VXUS every paycheck until I retire. I rebalance in Q1 every year but other than that I haven’t sold anything in years and will not sell anything for another 25 years ~.
Most of my savings are in a TDF for retirement and there is not an esg fund that is close enough for my comfort and thus I feel I have to go that route. as for my individual stock purchases I will not buy companies that I have strong antagonism toward. I know that emotional investing is not smart investing, however there are a lot of profitable companies out there and i dont have to be involved with all of them, i can try to avoid the ones that are most onerous to me. For example i will not invest in Tesla until Elon stops being the principal beneficiary of that investment (also fundamentals are wack). I also avoid oil companies for both macroeconomic and ethical/environmental reasons. Oil will be on the decline and while profitable for a while will have a decline and I dont want to be on that ride. I have been avoiding arms manufacturers but I am considering some investment in Rheinmetall/alternatives because I do believe in this case they will be facilitating the causes of freedom and that this will be a very lucrative endeavor for them. Even with their recent runup they are still undervalued, I think Europe is going to arm up over the next decade+ regardless of what happens. Also hedges against further currency risk for my portfolio (I think that right). UBH, ugh I will never invest in because I have worked with them professionally in the past and they are a trash company, profitable but trash. That blood money is weight my soul can do without.
VIGAX is a bet on the growth subset of companies (ones with higher expectations and higher prices to match). Those have done really well the past decade/two, [but historically underperformed value](https://www.dimensional.com/us-en/insights/when-its-value-versus-growth-history-is-on-values-side). I wouldn't describe investing in it as "more aggressive" in the way that you want; what you're trying to do is increase returns through increasing [compensated risk](https://www.reddit.com/r/Bogleheads/comments/1cnjdvz/what_do_you_all_mean_by_uncompensated_risk/). For your goal, I would simply start with VTSAX, VTIAX, and a bond fund in proportions similar to the TDF, then reduce the bond percentage as you are comfortable: * https://www.bogleheads.org/wiki/Asset_allocation * https://www.bogleheads.org/wiki/Risk_and_return:_an_introduction * https://www.bogleheads.org/wiki/Risk_tolerance * https://www.bogleheads.org/wiki/Assessing_risk_tolerance
I appreciate the insight as I’m new to this. I’ve always left the TDF alone but the fees over the next 10 years are about 40k more than my current allocations. I will be investing weekly regardless of what the market does as I don’t have a choice. I work in construction and our hourly rate is split about 60/40 so 40% of the hourly rate gets put into a 401k. (Prevailing wage work)
For many people it’s just a hobby. They don’t care if they underperform the market. Often times they have the mentality that their 401k is their retirement and that’s in a TDF or whatever. They’ll work till 70 and that 401k will be enough, and anything outside of it is fun money, whether that’s fun picking stocks or fun buying a sports car or etc.
(34m) ditched tdf for 46.5%VTSAX 28.5%VTIAX 25%VIGAX did I make a mistake? TDF had an expense ratio of .64% that bothered me when crunching some number for over the next 10 years. I was between the funds listed above and GRMIX 75% VTIAX 25% the plan advisor steered me towards my current allocations. What do you guys think? I wanted something that mimicked the TDF without bonds, but more aggressive.
Most 401ks I am familiar with do not auto invest anything. The money sits there as cash (this is not an investment, except for brokerages like Fidelity that automatically hold it in their sweep money market). You have to determine what that cash is invested in, either a TDF as you say, or in whatever funds your 401k provider has available to you.
How about switching into the 2070 TDF 90% 10%?
That's like saying the S&P sucks, NVDA is up bla bla bla %. The reason TDF's suck is that it's very easy to look up what's in one, replicate it yourself manually, and save on fees. You just need to go in and adjust it every few years. But TDFs aren't for people in this sub. They're for the type of people who say "Oh yeah my work automatically takes some money out of each paycheque and puts it away for me.. I've never logged into the system though". I work with a lot of people like this and it's insane. Other Professional engineers losing thousands of dollars a year to fees. I've even offered to write down the steps for them to follow to go into the system and adjust it, and they just won't. Even when I explain to them they'll be getting the exact same funds as are within the TDF, just for 0.5% fees instead of 1.5% (Our work system has insane fees, but it's still not worth losing out on the matching to opt out, I've checked) Perhaps they're afraid they will intentionally stray from replicating the fund and start gambling if left in control. Like I don't know how they would really do that within my shitty work system, but maybe they imagine they would. These funds are also quite handy from the perspective of program administrators. Your work HR etc. They set it as a default to be automatically chosen based on the employee's age and when they'll be 65, and they can wash their hands of it and say they've done their due diligence. Very legally defensible. Imagine if the default was full stocks and some 64 year old had it crash right before retirement instead of having a buffer. It would be much easier for them to sue over that than high fees or low performance. Regardless, the company running the fund gets their tax on the lazy people of the world.
The fees on some TDF families can be extremely low.
>They tend to have something like a 60-40 stocks:bonds ratio. The stock to bond changes over time. It starts stock heavy (usually 90% or more) and eventually starts a glide path to be more bond heavy. I believe OP mentioned being in a 2050 Fidelity TDF, that should not have started the glide path yet (so it'll be within reasonable rounding distance of 10% bonds). It is the US to international stock part that is usually around a fixed 60/40 or 70/30.
Quick question about target date funds and 401Ks: this is what I have 100% of my 401K in currently is just a 2055 (I think? maybe 2050?) TDF. Are there other things that would be good to add to my 401K, or am I good to just keep it as 100% the TDF? Also, would it be good to throw a TDF into my Roth IRA as well? I currently just have VOO in my Roth, probably will add one or two more ETFs into it like QQQ or SCHD or SPYI or something like that?
I swapped my 401k out of the TDF a couple years ago and I’m glad I did
No, that’s not how TDF ERs work
You are welcome to your opinion, as am I. The Vanguard TDF glide path has 90% stock until age 40. I think a low cost TDF is fantastic for people who don't understand investing or don't want to take the time to learn and manage it themselves.
That all makes sense but the fidelity 2050 TDF got fucking destroyed in 2022. Peak to trough was over 30% drop.
Depends on the TDF. Vanguard and fidelity have TDFs under 10 basis points
1. TDFs are not 100% stocks 2. The stock portion is globally diversified: mostly S&P but also small and mid cap, plus international. 3. S&P has been on a tear the last 10 years. The S&P also had a 0% return from 2000-2010. 4. If you want more potential return than what a TDF can offer, it means more risk. If you can stomach that risk, then maybe you can be 100% stocks. But if you can’t handle that much risk (which is normal for 40) then you probably want to stick with the TDF.
The 10-year return isn't lower than the S&P because the TDF is too conservative with equities, but because it's diversified internationally. VT is "only" up 130%. Also, S&P is up 210%, not 250%. For any date more than 10-15 years out, a TDF is basically just VT plus a tiny bit of bonds. So this really just comes down to the international allocation debate that gets rehashed every day on here. International has under-performed US badly the past 10 years, but there have been long periods of the opposite over the past 50 years and it could happen again at any time.
That’s just not true. Fidelity’s 2050 index TDF is less than 10% bonds right now.
Target date funds are funds of funds. The overall performance is just the weighted average of the component funds. S&P 500 is not a fair comparison for a TDF, as TDFs typically use US total market style for the US coverage (recent history has favored large caps, but that isn't always the case). TDFs also typically have 30-40% of stock as international. International should be thought of as just as aggressive as the US, it just didn't do quite as well as the US in recent years (though a longer view of history shows many periods where it would have been the US dragging behind). Then, there's likely 10% bonds in that 2050 fund (far from the 40% someone else mentioned), bonds have lower expected returns than stocks but typically provide more stability than a pure stock portfolio.
>For context, a target retirement fund might be doable in a standard IRA or Roth? Or just Roth. Any tax-advantaged account: 401k (Roth or traditional), IRA (Roth or traditional), HSA, 403b, etc. >For my taxable brokerage, what would be the comparable to a target fund as a point of reference. The boglehead portfolio? You can just build the TDF yourself: https://www.bogleheads.org/wiki/Approximating_Vanguard_target_date_funds If you want to get fancy, you do this across all your accounts and put certain funds in certain places: https://www.bogleheads.org/wiki/Tax-efficient_fund_placement
>Target retirement funds such as 20XX. What happens post date? Vanguard's TDFs have a "glide through" path to where it keeps shifting into bonds past the date of the fund. Example: [Vanguard 2050](https://investor.vanguard.com/investment-products/mutual-funds/profile/vttvx) has 50% stocks still. And it will eventually merge into [Vanguard Target Retirement Income](https://investor.vanguard.com/investment-products/mutual-funds/profile/vtinx) fund, which is 30/70. >1 - But if i retire on 2027 and decide to buy a 2025 target. Since its post target date it would be in bonds. No. I'm not aware of any TDF that goes 100% into bonds. >Would I get the dividend yield indefinitely? Or would the target fund have some liquid date in the far future? What happens then? The fund is just a fund. It never liquidates, and it doesn't guarantee you've saved enough to last the rest of your life. >2 - with the current administration changing the framework and actively influencing the fed and tweaking numbers, inflation is sure to come. But how will the bonds handle in the long term if investors lose confidence in the us market. That's a little harder to answer. >3 - Do retirement funds post target date diversify in international or pure us bonds? VTINX still has 15% ex-US bonds and won't go lower than that. 4 - Any negatives if I early retire in 2 years (then age 53 in 2027) and go with a 2025 / 2030 retirement fund? No. The fund year is just a benchmark; it has no actual impact on your account. A 20 year old can invest into the 2025 TDF for all anyone cares (they shouldn't, but they can). 5 - any recommend target retirement funds?I know vanguard is popular. For either taxable or Roth. Am not trying to min max for absolute best results but reasonable good enough/ above average to set and forget. Vanguard is the gold standard of TDFs. [Do not invest TDFs in a taxable account though](https://www.bogleheads.org/forum/viewtopic.php?t=447240).
Depends upon the fund, but there is no reason to assume that a TDF will be 100% bonds in the target date year. Most (maybe all?) state that they will continue to invest, but the glide path continues until the fund resembles a retirement income fund. FFFDX is Fidelity's 2020 TDF and has the following allocations: US Stocks: 25.51% Non US Stocks: 22.56% Bonds: 54.04% (including about 5% in international) Shore-Term and other assets: -2.11% This fund will continue to glide to its ultimate asset allocation in 2040 which will then be 24% equities and 76% fixed income.
Do not pay any voluntary fees for management. A 0.2% expense ratio for a TDF isn't horrible. "Excellent" would be like 0.08%. Horrible is something like 0.7%.
What don't you like about the TDF that's motivating you to change away from it?
Look up AOA and AOR. 80/20 and 60/40. Same as a TDF, but constant target allocation rather than time adaptive
I hate these posts. TDF are designed to underperform. Its goal is to make sure you have a safe nest egg to retire with. As you age and approach retirement age it sells stock and buys bonds. Typically its percentage of bonds equals your age. So if you start at 20, it’ll be 20% bonds, 80% stocks. When you’re ready to retire at 65 it’ll be 65% bonds 35% stocks. So assuming you’re 40, your 2050 fund should be 40% bonds and 60% stocks. If your 401k lets you only select from TDF funds and you want to be more aggressive, choose a 2060 or 2065 fund.
I have a TDF(American funds) I am funding through my employer. I have it set for 2060. That account is at $80k. What target funds should we consider?
Depending on the % of bonds, a TDF has underperformed having most if not all one’s money in the stock market. Especially from the late ‘00s as bond yields really dropped. Stocks are risky but they’ve provided great gains in the long run. A TDF can still be useful with less correlated assets but think one word of advice (Merriman) is keep the TDF % = 1.5 x age with the rest in a stock fund. Could be altered as 1.5 x (age-10) or whatever you feel comfortable with. As a TDF gets more conservative it can actually get more useful with age if stocks have a blowout.
no shit....of course a TDF is under performing, what you think it was gonna do with bonds and international?
Part of that is it has bonds. Depending on your goals and risk tolerance forgoing bonds could be reasonable for the next 10-15 years. Part of it is that it has international, and international has underperformed. It doesn't always underperform though, sometimes it outperforms for long periods, and you just can't know which the future will hold. Moving out of the target date fund into 100% VT is fine as long as you add your own bonds (or just move back into the TDF) at some point as you near retirement. Doing anything other than 100% VT is a mistake though. QQQ did really well the last 5 years, but that doesn't suggest anything about how it will do over the next 5 years.
If you want to be more aggressive than TDF, just do VT or VTI + VXUS. Same thing as TDF but without bonds.
As you get older your TDF is composed of more and more bonds and money market funds. This is primarily to PROTECT your money for retirement, but the trade of for reduced risk is that your returns are significantly lower. If you wanted to swap out an equivalent would be a variation of the 2/3/4 fund portfolio that you can find in r/Bogleheads , but TLDR that is some ratio of VTI+VXUS+BND+BNDX or VT+BNDW. Less protection for your money, but more money can be made if you just buy and hold.
He’s right. This freak’n “my TDF ain’t outperforming the most tech heavily concentrated SP500 ever” shit needs to end.
Maybe if you have low risk tolerance. I actually dumped my entire TDF today. Too conservative for me at this point.
You can learn a lot about investing and still arrive at the conclusion that a TDF is the best place to put put money.
Ah yea sorry I fixed it. TDF glide paths add more bonds than 30-40 year olds need, and most 20-30 yo don’t need any.
>But understand that they get too aggressive too quickly I think you meant the opposite? That they get too conservative, too quickly? At least, that's the main (and possibly, only) concern/complaint I hear about TDF from most folks.
The TDF in my 401k has an expense ratio 24x higher than the expense ratio for the S&P500 fund. No thank you
One suggested portfolio part in a TDF with its % 1.5 multiplied by age, and the rest in a 100% stock portfolio, the latter % decreasing with age (Small Cap Value but could be a broad index). This from Paul Merriman iirc, who usually suggests 8 or 10 fund “factor” buy and hold portfolios. So the idea is when young, a TDF may be a bit too tame but steadying if the economy goes bad vs growing older a TDF may provide enough diversification to weather an economic storm.
This is the problem with TDF. TDF = target date fund. —>Problem: (once the target date has been reached) or (as the target date gets closer and closer) — investors “that are invested in the TDF fund,” are going to sell their shares. —>Once investors start selling their shares, the market price is going to drop. Locking in their CAPITAL GAINS. Those investors, who did not sell their shares + are still holding the bag — these investors are going to experience “a decrease in their stock portfolio balance.” Perhaps these investors, who were left HOLDING THE BAG ONCE THE TARGET DATE HAS BEEN REACHED — perhaps, these investors wanted to retire via CONVERTING MAXIMUM CAPITAL APPRECIATION, for maximum capital gains. —>If you do pick a TDF fund — pick one that has a target date, that “extends past your actual retirement age.” Ex: You are 40 years old. You hypothetically retire at 65 years old. That is an extra 25 years. —>2025 + 25 years = 2050 TDF fund. This (will become less aggressive) and (people will start selling massive amounts of shares), when the year becomes 2050. TDF shares being sold = lowers the market price of TDF. —>If you retire at (65 years old/year 2050), you want to invest in a TDF fund that is (greater than 2050 number). So that, you can still have maximum capital appreciation, even when you are 65 years old.
Right on, man. I originally had TDF 2055 and switched to TDF 2065 a few years ago for my 401k. I may swap to 2075 if bonds move quickly in 5-10 years.
Currently have VLXVX in my 401k, and it’s held up well for what it is. I’m not expecting above average returns (It’s a TDF after all; though it’d help), As long as I keep contributing and compounding does its thing, all that matters to me.
I'm not a big fan personally. Just took a look at the vanguard TDF 2055 and it has nearly 9% in bonds. That seems about 9% higher than I'd like 30 years out. If you don't want to put any effort whatsoever into investing then they could be the move low key
That depends on the fees for the specific TDF in question. My 401k is 100% TDF and I pay a 0.08% expense ratio, which is a negligible cost.
It’s good to have a modest amount of bonds actually. Not having them could majorly fuck up your plans if a recession were to happen right before you plan to retire. People with a TDF are better insulated against those eventualities, while still mostly following your index fund set and forget strategy. You’re way isn’t the worst idea ever, just carries real risks that everyone lately especially on Reddit seems to want to pretend don’t actually exist.
It’s not a horrible idea to start buying bonds at 28. I do think it’s a bad idea to change your plan based on current or expected market conditions. I am 41 and hold no bonds other than a small % of my 401(k) bc it’s a TDF. I plan to start layering in bonds then I get within 15 years of retirement and shift toward wealth preservation mode. Presumably youre still 30-40 years from retirement and not yet in wealth preservation mode.
They are perfectly reasonable TDFs. Most people will use their broker's homegrown index TDF that's a mutual fund. But if for whatever reason you can't or don't want to do that, the ishares TDF etfs are a good alternative.
If this was your interpretation of events, you should set up auto-investing into a TDF for retirement. Then live your life in bliss, never checking investing news or subreddits again.
The volume will probably go up the closer to that year we get. Not many people are buying a TDF ETF but you should also not be selling it for 35 years. Discounts and premiums can happen with an ETF when you sell, but also when you buy. If you're that concerned, just move it to a mutual fund.
That's a lot of money for a 27 year old. Nice. \- Holding SGOV is a perfectly reasonable emergency fund. That's also a lot of money for a house- if you can get a favorable interest rate without putting $200k down (which you should), you'll probably be better off investing some of that money. It's fine to wait until after you move to get firmer handle on housing costs and expenses, though. \- There's no reason to \*not\* max your Roth IRA with such a large brokerage account, IMO. Move money (long term capital gains) from your taxable to the IRA at the end of the year if you haven't hit the max via your normal, budgeted contributions. \- As a smaller thing, why split VOO/VXUS (no US small- or mid-cap) in the taxable but VT (no international) in the HSA? Why a Target Date fund in the 401k (higher fees + 6% bonds on a tiny portion of your overall portfolio)? These are all good investments, so you aren't doing anything "wrong" per se, they just don't necessarily line up. For the 401k, for example, using VITPX + VIIIX (basically the mutual fund versions of VT and VXUS since you apparently have access to Vanguard mutual funds), would cut your 401k expenses down to a quarter of what they are with the TDF and be more consistent with your other accounts.
TDF funds are pretty conservative, they’re not going to exactly make you rich. Theyre designed to reduce volatility over time by reducing equity exposure and increasing bond exposure closer to retirement date.
What’s a TDF? But thank you!
You’re doing awesome!! Find a trustworthy pro you like. You must make great money. You should be optimized. Maybe you don’t need them to actually manage the money. But the financial planning aspect would benefit you. Awesome job though!! Change your 401k to sp500 or NASDAQ if available. At 27 you have zero idea when you will start drawing. You’ll give up a lot of growth with that TDF so early. And they normally have higher internals. Just check to see. Great job man!