Lifecycle fund analysis

[jIM_Ohio]

This links to a pdf file which studied the lifecycle funds from many prominant fund families. You can subscribe to receive the report free of charge.

http://turnstoneag.com/downloads/PoppingTheHood2005.pdf

[sweeps]

What's the Cliffsnotes version for us lazy folks?

[jIM_Ohio]

The article compares the lifecycle funds of major firms. Vanguard, T Rowe et al.

T Rowe has by far the most aggressive allocation all the way through, median expense of .77 basis points. Overweighted growth to boot all the way through too.

Has around a 3 page commentary for each company- going over allocation, fees and comparing them to "category average".

I have not read whole document, but considering how often these questions come up, I think this is an excellent reference from a neutral source.

Thanks Jim.


I've been eying T. Rowe Price for some time now and even opened a taxable account with their very reasonable account builder program. I've given some consideration to moving my retirement account over but for the time being I'm very happy with Vanguard.


Speaking of Vanguard, it's important to note the report is dated before they made the allocation changes to their funds to make them more aggressive.

[jIM_Ohio]

there is an update to report coming out soon.

I'll be interested to see if as time goes on and the life-cycle category gets some history under its belt, if people don't start trying to use them for market timing purposes.

you have a group of pre-allocated funds waiting for you, if you felt plucky and convinced yourself you see the market turning for the worse, you could conceivably move your assets from your custodian's 2045 fund to maybe the 2020 version in the hopes it would minimize the damage and protect your investment.

likewise in (what you believe to be) a good market environment, you could move to a fund that is technically beyond your expected retirement range to capitalize on increases in the market.

not something I think I would bother with and it opens up that whole can of worms about predicting the market, but something to watch for nonetheless.

right now they all look good because they weren't tested by the bear at the beginning of the decade (T. Rowe Price and Vanguard initiated most of their funds in 2002 and 2003). if I'm not mistaken, from that point pretty much all you needed was a pulse to post respectable numbers.

Fidelity got started around 96 on some of their's and 10 years down the road show returns around 8 or 9 percent (which I believe is right in line with the S&P 500)


basically, here's how the Fidelity 2000, 2010, and 2020 funds did through that oh so happy time:

2020 fund:
2002 -13.71
2001 - 9.07
2000 - 3.03

2010 fund:
2002 -6.85
2001 -4.34
2000 + .67

2000 fund:
2002 -1.83
2001 - .09
2000 +3.98


so the point being, as a younger investor with my money in for example the 2020 fund around that time, it would have been in my interest to move to the "wrong" fund until the market began looking up again.


again, not something I would try but I wouldn't be surprised to see it start happening. the ultimate manifestation of this would be recommendations from investment advisers that people "move" because of this signal or that warning or whatever.


long winded I know and I'm sorry, I just enjoy the conversation.

[jmjj215]

Originally Posted by rexdart

I'll be interested to see if as time goes on and the life-cycle category gets some history under its belt, if people don't start trying to use them for market timing purposes.

And if you do as well as the average market timer, you'll underperform the market by probably 80%