Changes to Vanguard’s Target Retirement Funds
Vanguard announced today that they will be modifying the asset allocations on their existing Target Retirement Funds in the near future. The majority of complaints about these funds have been centered on the fact that they are overly conservative and that they lack adequate exposure to foreign markets. The announced changes by Vanguard appear to be in response to these concerns, though it is not noted as to when these changes will occur.
[UPDATE: According to the supplement to the prospectus the changes will take effect "on or about June 5, 2006".]
In addition, Vanguard intends to add five additional Target Retirement Funds – 2010, 2020, 2030, 2040 and 2050 to complement the existing set.
The overall response to this move has been mixed. We ourselves are invested solely within Target Retirement 2045 (VTIVX) in each of our retirement accounts. Though I have no complaints about the changes, I am concerned that if Vanguard buckled under the pressure to increase equity exposure in a bull market, will they do an about face and make the allocations more conservative when the market plunges?
As far as the new fund additions are concerned, I don’t immediately see any benefit to having them and think their addition will bring unneeded complication.
[UPDATE: According to the supplement to the prospectus the changes will take effect "on or about June 5, 2006".]
In addition, Vanguard intends to add five additional Target Retirement Funds – 2010, 2020, 2030, 2040 and 2050 to complement the existing set.
The overall response to this move has been mixed. We ourselves are invested solely within Target Retirement 2045 (VTIVX) in each of our retirement accounts. Though I have no complaints about the changes, I am concerned that if Vanguard buckled under the pressure to increase equity exposure in a bull market, will they do an about face and make the allocations more conservative when the market plunges?
As far as the new fund additions are concerned, I don’t immediately see any benefit to having them and think their addition will bring unneeded complication.
posted by Brian at
11:41 AM
2 Comments:
My first visit here! I like your blog a lot and am really impressed with the layout. I just wanted to add that I too am invested in T-2045 for both mine and my wife's IRAs. I echo your concerns about increasing equities exposure in a bull market.
However, I think the mildly more aggressive asset allocation (10-20% more stock) over time will be a huge benefit for us over 40 year time horizon! And more than pay for itself despite investing in more stock when prices are already high.
Additionally, I think that their basic justifications for the increase are correct: longer life expectancy, higher cost of health care, etc.
Moreover, I applaud their (and almost any) effort to further diversify our holdings and thereby decrease overall portfolio risk.
The very modest stake in emerging markets (1-2.5%) potentially gooses our returns. China, India, Latin America and Russia are not going to stop developing! And it's nice to take part in their rise.
By
Anonymous, at 3/24/2006 10:13 AM
Good points, thanks for reading!
By
Brian, at 3/24/2006 11:24 AM
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