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between a retirement fund (say Vanguard 2040) and the Total Stock Market Index fund within a Roth IRA. Which would be better to do, open the Roth IRA and just select the Retirement Fund 2040 and forget about it or the other option? If I did the latter, I am not sure how to go about it each year. Thanks.
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The difference is 2040 fund contains 72% U.S. stocks and 28% of other stuff. Therefore it is more diversified; however I don't think the returns will be that different over time. -
Basically, the TSM is a passive index fund attempts to track the entire US stock market (supposedly more closely than the S&P and certainly the Dow).
Target Retirement funds are a Fund of Funds that includes the TSM, along with international funds and a bond fund. Also, unlike straight index funds, Target Retirement Funds will also change the asset allocation of these funds for you as time goes by.
Go TSM if you care only about the domestic market or if you want to slice & dice your own portfolio. Otherwise, go Target. If you're not sure or have any questions or doubts, go Target.Comment
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Thanks for the replies.Comment
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I imagine you will find the "Target" funds start to add commodities in the mix before long to achieve "diversification."
Just a futuristic opinion from a wannabe futurist
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Originally posted by ActYourWage View Post
Vanguard® Target Retirement 2040 Fund seeks to provide capital
appreciation and current income consistent with its current asset allocation.
Who Should Invest
Investors seeking long-term growth of capital and income.
Investors seeking a simple way to achieve a broadly diversified holding of stocks and bonds that will gradually become more conservative in its allocation.
Investors seeking to retire between 2038 and 2042.
Who Should Not Invest
Investors unwilling to accept significant fluctuations in share price.
Investors seeking maximum long-term growth of capital.
Investors expecting a guaranteed level of income upon retirement.
Glossary
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