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  • Target Retirement Funds

    I am looking at target retirement funds and wanted to get an idea from people with experience, whether it is a good investment. It seems like a fine idea, a fund that gets more conservative as you age, but I am hoping for some feedback from those who have invested in one.

    Thanks

  • #2
    I have the Target Retirement funds with Vanguard and I really like them. Your funds are invested in International and domestic funds. I just send in a check and it goes into one fund. I used to worry about rebalancing and this is done for you. It is sometimes too simple for some people but it works for me.

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    • #3
      Originally posted by Aleta View Post
      I have the Target Retirement funds with Vanguard and I really like them. Your funds are invested in International and domestic funds. I just send in a check and it goes into one fund. I used to worry about rebalancing and this is done for you. It is sometimes too simple for some people but it works for me.
      I also have a roth invested this way. It is very simple. You won't earn quite as much this way because all your funds are in one company but you should get decent returns. I'm averaging 6% YTD. I do however actively manage my main retirement plan and it does do a few to several points better on average. I just don't really have the time for the roth and it's value is much less.
      "Those who can't remember the past are condemmed to repeat it".- George Santayana.

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      • #4
        Target funds can be a simple solution to put everything on autopilot. Many people go and mess it up by putting a target fund in one account, like their 401k, and then buying other funds and investments in other accounts which somewhat negates the purpose of the target fund.

        One thing to keep in mind is that not all target funds are the same even though they may be titled with the same year. For example, Vanguard's 2040 fund and T. Rowe Price's 2040 fund have different asset allocations and different rebalancing formulas. They don't currently hold the same percentages in stocks and bonds and they don't adjust the mix at the same time or same rate. One is somewhat more aggressive and one is more conservative, so you need to think about that when making your choice.
        Steve

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        • #5
          Originally posted by disneysteve View Post
          One thing to keep in mind is that not all target funds are the same even though they may be titled with the same year. For example, Vanguard's 2040 fund and T. Rowe Price's 2040 fund have different asset allocations and different rebalancing formulas. They don't currently hold the same percentages in stocks and bonds and they don't adjust the mix at the same time or same rate. One is somewhat more aggressive and one is more conservative, so you need to think about that when making your choice.
          I meant to mention that my Vanguard fund is the 2020 and like DS said it's leaning more towards the conservative side because of the shorter time horizon.
          "Those who can't remember the past are condemmed to repeat it".- George Santayana.

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          • #6
            I am no financial adviser or have any professional certifications, but I do have common sense and the ability to do research with all the free finance sites out there. I have a retirement account that offers Target funds but these funds do not take into affect the economic situations of the time. For instance, if you are in a 2020 fund then you have a large portion of your investments missed %15 gains in the S&P year to date. I like to control my money and use the target funds as a guide for spreading it out, but by understanding generally what's going on the economy I have put more in tracking the S&P this year. The index fund strategy still holds true I think, but look at mutual funds that are at least 10 years of age and average greater than 8%, some are exceeding 10%. Also, we are in a global economy now so don't be bashful regarding emerging markets like India and China. They are a huge player in this economy and those countries are no longer rookies on Wall Street like Africa is. Point is, spend some time researching mutual funds that have been around a while providing a consistent return. Don't get all hung up on fees, loads, etc if you plan on holding the fund for more than a year. Ultimately, you need to trust your gut and determine your risk comfort level. Calculate the minimum you need to live in retirement and spend some time looking at consistent returns and decide if they meet your needs. The economy may have tanked in 2008-2009, but we got a lot of it back and companies have become smarter and more efficient.

            David M. Borowski
            Last edited by thefamilyfinanceguide; 11-02-2010, 06:07 PM.

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            • #7
              Error - double commented due to error on page update. Sorry for inconvenience.
              Last edited by thefamilyfinanceguide; 11-02-2010, 06:11 PM. Reason: To remove double comment.

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