TDF

AICHEngineer

I would go 100% S&P index fund if the TDF fund costs are that high. The diversification isn't worth that price. You can always get your international diversification in your IRA after you secure the company match in the 401k.

AICHEngineer

Target date funds *should* be cheap too. Vanguards target date funds which are essentially VTI + VXUS + BND + BNDX are only 0.08 ER on google. Industry average is apparently 0.48, but they're just not worth it. For example, my 401k is hosted on fidelity, but our plan had vanguard target date options. The 2065 TDF has an ER of 0.065. it's the same for all the funds offered.

zel_bob

Correct the index fund was crazy low compared to the TDF which was close to 1%. I think between 0.6% and 0.9%

MONGSTRADAMUS

If that is the case you could try to make your own TDF with index options she has available , may have to rebalance once or twice a year but thats another option, assuming she has indexes other than sp500 , since we don't know what she has in her 401k .

zel_bob

That was another thing that made me think twice. Her expense ratios were almost 1% where mine on my target dates (Vanguards) are 0.06%. Her Index fund was 0.015% or something like that. Point here is the expense ratio for the TDF was more than 20x the index fund.

MONGSTRADAMUS

2060 and 2070 would be almost the same roughly speaking in terms of stock to bonds ratio. Vanguard tdf for example 2070 vs 2060 they are both 54% US stocks 36% ex-us 7% domestic bonds 3% ex us bonds. For a well rounded portfolio for set and forget TDF are really good options. The only factor i would consider is what expense ratio the tdf is , if its a active or index fund.

greytoc

Its not a bad choice. But it really depends on the timeframe and risk tolerance. If the funds are needed when the account reverts to the beneficiary - you could also explore a Fidelity TDF (target date fund).

AICHEngineer

If you want true simplicity, you can take a target date fund set for 2025. It is a conservative asset blend of domestic and international equities plus a large portion of bonds. You could then withdraw from that. For example, ignoring your other assets, the IRAs alone can sustain double your current goal of an addition $2000 a month. If your IRAs were invested in a TDF (any horizon, the later the year on the target date fund, the more stock exposure it has. It will have higher returns but higher volatility) you could withdraw ~4,400 a month with a high degree of safety that you could sustain that consumption rate from the IRA portfolio for at least 30 years. This assumes 1.32 million at a withdrawal rate of 4% of its present value ($52,800 a year or 4,400 a month), and then adjust that value for inflation every year. Next year (if inflation is 3.5%), you would withdraw $4,554 after I flatiron adjusting by a multiple of 1.035. You have a lot going on, it may be worth it to sit down with a flat, one time check, fee fiduciary financial planner. Not a wealth manager, just someone who can help you parse out your assets and make sure you're *not being too conservative*. You have a lot of assets and can sustain a healthy retirement. Retirees like you can actually end up spending too little and forfeit higher quality of life (especially earlier in retirement when you're healthier and can do more activities). You can likely increase your spending and simultaneously leave a bequest. Or, you can start gift giving to elevate the lives of friends and family. Or you can go on some baller vacations. Side notes: You're holding waaaay too much cash, at least make sure that is in a HYSA, or better yet a money market fund. You have enough money that you don't need outsized exposure to riskier assets like equities to sustain future spending, but still. Too much cash decreases your portfolio longevity. The company stock is a sticky issue, it would be best if possible to divest from that as soon as possible tor educe your idiosyncratic risks as a couple and reallocate that money to diversified funds.

harrison_wintergreen

>Target fund has grown 12.26% in that time versus S&P at 171.97%. I am 15-20 years from retirement. you're not reading the data correctly. the TDF has averaged 8.46%/yr over the last 5 years while the S&P 500 has averaged 12.96%. click on "performance" in this link. https://institutional.fidelity.com/app/funds-and-products/1204/fidelity-advisor-freedom-2040-fund-class-i-fiffx.html >Should I get rid of the TDF? you should get rid of the S&P 500, because your TFD already has all the same stocks and by having both you're just more concentrated in large American companies and increasing your risk. the S&P 500 has had a dynamine 10+ years but it won't last forever. from about 2000 to 2010 you got much better returns from smaller US company stocks and international stocks than from the S&P 500. this type of thing will happen again eventually, and the TDF covers all the bases.

Rolcol

Dividends. The TDF generates more distributions than an S&P 500 fund.

tired_ani

How do you all get your international diversification? My 401k Vanguard TDF has 30% in International stocks. I honestly haven’t looked under the hood. Don’t have any international in my Roth/post task. I would like to buy an Index that has international stocks. Currently thinking abt AVDV but that only represents a subset (Small - Value - Developed) . How do you guys do it?

s32bangdort

This is bad advice. If you don’t know what to do with your contributions to a 401k, a TDF is probably the BEST thing to do. Diversification in us equities, international equities, and bonds. With an allocation typically on the conservative side but arguably much better over a long period ( 10+ years) than just a money market sweep account fund.

Kashmir79

More specifically, if you punch the funds into a backtest to May 2019, [this is what you get](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=5KXZV5rmHSehO7nr01zMa2): VFFVX: +56.05% VOO: +92.63% Yes the S&P 500 has been on it’s best run in history, international stocks have been flat, and US bonds had their worst bear market in history, so just looking at S&P 500 in hindsight would have been better than a diversified TDF, although you couldn’t have known that at the time. But OP’s numbers are way off, and a 9.47% CAGR for the TDF is great. They should have $15k by now, not $12k, but it’s not clear where the miscalculations are occurring.

greytoc

Many 401k plans have a US large-cap equity fund - you could just invest in that if you have a higher risk tolerance than using a TDF. Pulling funds from a tax advantaged retirement plan to invest in a taxable account doesn't make any sense - especially if your idea is to invest using an S&P 500 fund like VOO.

OhGoodOhMan

1. There's probably a similar fund to VOO available in your 401k 2. TDFs are more diversified than VOO, since they also hold international stocks (probably around 30%), and bonds (likely around 10% if its target date is 31 years from now). You will see lower returns compared to VOO when US stocks do well, but the TDF will fare better when international stocks do well. 3. If those were traditional 401k contributions, you need to pay both the 10% early withdrawal penalty *and* income taxes on early withdrawal.

Kraftwerk123

A few years ago, the company I work for switched to Ascensus for our 401K program, no one ever talked about the 401K at work, just knew you were enrolled in the program, and once a paycheck there was a 401k deduction. Once we switched, the company made everyone make a login and look at your account and see what was going on. Doing this, I realized no one ever really talked about 401k at work, nor talked about what type of investments you have, how they are allocated and so on. It was terribly eye opening to see that the first 10-ish years of my work life and investments were allocated to some (safe?) bond funds and some terrible TDF's(shame on me for not looking into this, but to be fair I was 22-23 and this was back in 08 and cars/girls/going out was more important). logging into Ascensus looked like it was a joke, trying to navigate their page isn't that great, trying to sell funds, buy funds, allocate % of funds isn't to straight forward either. Had to make several calls and talk to multiple people. But after a while, got everything taken care of and think my account is in a better growth state. The amount of options to choose from, stocks,bonds,TDF's are not all that great, idk if thats from work only or that is what Ascensus only offers? But I have looked into their fee's a few times last year, and WOW they are steep. Fees for EVERYTHING it looked like, I attempted to bring this up to the Office manager at work, and HR whom are supposed to handle 401K issues, and all I got back was " well there are going to be fees for handing your money, what do you expect". I really wish I could move mine over to Fidelity, but no. Rant/over.

valexnyc

I think once it's in the IRA rollover you have more investment flexibility there vs. transferring it back into a company held retirement account - if that's what you mean by the TDF she currently invests in. The only benefit of doing is not to lose track of the rollover account but so long as you invest those funds and remember you have it then no reason to move it again. Remember to invest those funds ASAP. Its sometimes easy to forget to do. It is interesting that they rolled it over without her asking though TBH.

kronco

I would leave it in the Fidelity IRA account then invest in a Target Date Fund (TDF), other funds, bonds, TIPs, etc. Whatever works for your goals (now and in the future) as the Fidleity IRA will have a lots of investment options compared to most 401K offerings.

DeeDee_Z

Make sure you understand the difference between an **account** and a **fund**. (An account is a "container"; a fund is something you hold -within- the container.) > pros and cons are of keeping said money in the IRA (**that's an Account**) vs transferring it into the TDF (**that's a Fund**, which is held within some other **account**).

Sure_bye

I was 100% in TDF until last September and decided to move to managed services in October. Maybe they’re not done moving the funds out of TDF yet ? Not sure.. but I’m sure paying them quarterly.

hollywoodtlb

First: We know nothing about you or if that return is suitable for your targeted retirement year or what funds you should be invested in. Second: I highly doubt any managed account offering is going to allocate to a TDF as you're generally either a DIY, TDF or managed account investor (for retirement purposes). Investing in a TDF would go against the value prop of a managed account, so I'm skeptical that you're even in a true managed account. Third: I think this is a shit-post because after two seconds of research the TDF is up \~7% YTD and the Russell 1000 fund is up \~10% YTD so your YTD return doesn't even make sense.

andybmcc

I don't understand why they'd have you in the TDF if they're just going to break out everything else. That's the part that doesn't make sense to me. Otherwise, it's completely reasonable.

Benth8r

Holy shit they give a lot of options! If ur perplexed that much and not savvy, just choose a Target Date fund for all ur $. My advisor actually has his entire 401k in a TDF, although he does have it in a slightly more agressive year than his projected retirement date. Theoretically should be in a 2035 but said he's in a 2040 or 45. Cant remember which

gandorf62

What funds?? My TDF is 2.10% in Q1

rainbow_explorer

100% of my 401k is in a Schwab 2065 TDF. It’s price on 12/29/23 was $10.90 and it’s current price is $11.16. That is a 2.38% increase, which would be close to a 7.33% annualized increase because about 1/3 of the year has passed.

Freightliner15

Just do the Vanguard 2070 TDF. Thanks boring enough. Then, if you want to stay more aggressive just change to a newer TDF when it comes out.

Dragonfruit2K

Max out 401k if possible. Open an IRA and brokerage account if yo feel you need. Think about long term like ... Towards your retirement. Tax deferred account like 401k, IRA choose mutual funds, TDF or 3 funds portfolio. For brokerage choose ETFs...

Samjabr

You literally have no idea what you're talking about. Old people have money in pensions, or otherwise, like everyone else, they have 401ks - which generally offer target retirement date portfolios that automatically shift into bonds as you age. If you look at your own 401K, you will see most of the plans are named something like TDF 2035 or Vanguard 2050, etc. These funds automatically moved into bonds as they near that specific date. As for pensions: [Pension Funds Are Pulling Hundreds of Billions From Stocks - WSJ](https://www.wsj.com/finance/investing/pension-funds-stocks-bonds-679b8536) [Investors are walking away from U.S. stock-market funds, into bonds - MarketWatch](https://www.marketwatch.com/story/investors-are-walking-away-from-u-s-stock-market-funds-into-bonds-e0e8fab4) [Big bond market moves are coming, says largest US local pension plan (cnbc.com)](https://www.cnbc.com/2023/04/19/70-billion-la-pension-fund-rising-rates-change-everything-in-plan.html) [US Pensions to Gorge on Corporate Bonds as Funding Levels Soar - Bloomberg](https://www.bloomberg.com/news/articles/2023-11-22/us-pensions-to-gorge-on-corporate-bonds-as-funding-levels-soar) And if you had actually read carefully, I said that old people did in fact used to have much of their money in stocks - because the alternative was bonds paying 0%. But that is no longer the case because you can finally get a decent 5% yield on your money. But please, make some more conclusory statements absent any facts or evidence.

g_vfx_art

So in 2020, I bought VGHCX because I thought the dividend yield % was sexy and that it would gain me a higher return. But doing some research this year, as well as scanning similar threads of people in a similar position, it sounds like you're giving some solid advice on sticking with the TDF, so I'm going to exchange the funds out of VGHCX and back into the TDF today. Thank you!

Cruian

What about just going 100% TDF? It is fully diversified for you and generally intended to be the only fund you hold.

Cruian

The target date fund is already over 50% VTSAX right now. You'd be watering down the VTIAX and bond parts of the TDF.

boxofninjas

I use Fidelity and my set up is a TDF (Vanguard 2055) for my employer retirement account. Roth IRA 70% FZROX 30% FZILX Brokerage 75%VTI 10% VXUS 10% VGT 5% Random stocks I’ve held for some time. Besides the radon single stocks everything is set up to automatically invest on a weekly/monthly basis.

nutbutterguy

Nah it’s a Vanguard TDF so low fees. I didn’t plan on selling the TDF or getting rid of it totally. I am contemplating buying VT or VTI within the same account the TDF is in to be more aggressive.

carbonclasssix

At 39 right now I only have US/International, so two fund portfolio I guess. I have a TDF in my 401k.

boxofninjas

Mid thirties here, I have about 5% in random stocks and the rest are in funds. Currently the only bonds I hold are in my employer TDF.

boxofninjas

I use a TDF (also the Vanguard 2055) for my employer retirement account. So in my Roth IRA and brokerage accounts I don’t hold any bonds. My setup Roth IRA 70% FZROX 30% FZILX Brokerage 75%VTI 10% VXUS 10% VGT 5% Random stocks I’ve held for some time

Responsible-Box-5678

Whenever you are in doubt, diversify. The percentage of diversification should equal your doubt. It looks like you would be good with 50% TDF, 50% VT

nutbutterguy

Yeah I plan to keep the TDF in there. I wouldn’t sell it. Was leaning toward buying shares of both the TDF and VT in the Roth each year.

beckhamstears

Go straight equities, like VT. Who cares if the TDF is already there? You aren't realizing gains.

MPJ_1984

I was using TDF’s and switched to FSKAX. Don’t regret it at all! I’m in total market funds in 401k, Roth and HSA

nutbutterguy

Yeah I just mean investing in both the TDF and shares of VT in the Roth for an overall more aggressive IRA portfolio as a opposed to having just the TDF.

blacktarrystool

Is stick with the TDF but if you want to be more aggressive, higher % equities is the answer.

harvard378

Fair enough. Vanguard starts their glide path 25 years out from the target date, so you can easily leave your current money in the 2055 TDF until 2030, then decide how aggressive you're feeling. In the meantime, any new cash can go into the market funds of your choice.

nutbutterguy

Yeah, but I don’t want to get rid of the TDF entirely as it’s already in there.

taplar

A target date fund is going to hold some portion of equities and bonds. The primary reason to hold such a fund it because you want that, and you do not want to manage it yourself. If you do not want to hold bonds, then you shouldn't hold a TDF. If you don't like the weighting of the TDF you can either look for another with a weighting you do want, or in addition to the TDF purchase other funds that only buy equities/bonds to get your desired ratio.

andybmcc

TDF mutual funds can be very tax inefficient in a taxable account. There can be big distributions like Vanguard had in 2021.

SnooEpiphanies8962

After contributing the maximum to my Roth IRA, I've invested my remaining funds in a TDF within a taxable brokerage account.

andybmcc

>I understand that I will be paying capital gains tax every 5 years Wait, you aren't investing in a TDF mutual fund in a taxable account, are you?

nutbutterguy

What are the drawbacks of changing to a later TDF? I’m thinking of switching from 2055 to 2060 or 2065. They sell it and buy the new fund right?

Ok_Assignment4100

Since it's Roth IRA, kind of want to control what goes in there. Having bonds in a TDF is a huge no for me.

Cruian

>TDFs - If I want to have the fund for longer, is it possible to move the fund to another TDF? Example, if I’m retiring 2050, but decide to move my retirement by another decade (2060) is that doable? Yes, they're (usually) just mutual funds and trade just like any other mutual fund. I said usually because recently ETF TDFs were released. >Would TDFs yield similar returns as FSKAX + FTIHX? I know it depends on a few things but just generally speaking? It depends on which one you use. Something like a 2060 TDF will likely effectively be 90% FSKAX + FTIHX or equivalent, with 10% bonds and similar. Something like a 2025 TDF will be far heavier in bonds than the 2060.

Ok_Assignment4100

Man, guess TDFs might be in for me then — a set it and forget it method. A question: 1) TDFs - If I want to have the fund for longer, is it possible to move the fund to another TDF? Example, if I’m retiring 2050, but decide to move my retirement by another decade (2060) is that doable? 2) Would TDFs yield similar returns as FSKAX + FTIHX? I know it depends on a few things but just generally speaking?

junger128

I don’t know when TDF become more bond heavy but 10% at 40 years old isn’t necessarily conservative IMO. Maybe people don’t like so much international allocation? My biggest issue would be the expense ratio if it’s on the higher side.

Cruian

That 0.08% is basically the weighted average of the ER of the component funds. There's little to no extra they make from the TDF itself.

Cruian

There's more to look at than just expense ratio, especially when it is less than 5 basis points different. Coverage is important, and the TDF has far better coverage than S&P 500 only.

diy-fi

Hey - while the other commentors are right in that FDKLX has not outperformed the S&P500, given that [a passive target date fund](https://www.diyfi.co/retirement/what-to-buy-retirement.html) is a breadbasket of US and foreign equities that will shift toward bonds as you age, [there is still good reason to not fully shift toward the S&P and to carry US small/mid caps as well as international](https://www.diyfi.co/investing/what-to-buy.html#us-v-int), especially when you draw historical trends back. A TDF will allow you to set it and forget it and will give you far more diversification. Keep buying FDKLX and stay the course.

s32bangdort

Head over to r/bogleheads to get a quick study on what to put your money in. You can open the account at any of the aforementioned brokerages, and then buy shares of a “target date fund” selected based on your anticipated year of retirement. It will be invested in broad index of us stocks, broad index of international stocks, and some percentage of bonds/treasuries. These three segments are considered “uncorrelated” as there have been times when international indexes were going nuts and us index’s were flat. And vice versa. The bonds are just to reduce the volatility in the account. The TDF are very well setup according to the Boglehead approaches. It’s not that a TDF will not have volatility, but the approach is well vetted. If you need this money sooner, consider a high yield savings, treasuries, CD ladder, etc. After you have your Roth open and in a TDF you can research more to see if you want to adjust your bond ratio up or down (by an earlier or later TDF) to give you the exposure to stocks you can tolerate. Bogleheads sub can also suggest ETfs to buy in your account to also meet the three fund portfolio approach.

thedarkestgoose

The TDF will be fine.

bstandturtle7790

They merged their share classes a few years ago for their TDF, which resulted in the expense ratio coming down to the current 8 bps. The Inv used to be between 12-15bps depending what vintage you used. To get to the next break point is a $100mil position to go lower than 8bps, and it only gets marginally cheaper from there.

kronco

I suspect a Vanguard TDF gets the "Friends and Family" discount when they use other Vanguard funds.

Cruian

>The fees and expenses is only 0.08% but the multiple funds that make up this target date retirement fund (e.g. Vanguard Total International Stock Index Fund , Vanguard Total Bond Market II Index fund, etc.) have expense ratios of 0.12% or even higher. Have you taken the weighted average of the funds that make up the TDF? I believe that should be very close to 0.08%.

Luxferro

He doesn't want a TDF in a brokerage. He could get screwed like many people did a couple years ago when they made big changes to those funds causing huge tax bills. Either build a boglehead 3 fund portfolio or just buy VT (the whole entire market US&foreign).

Fenderstratguy

Paul Merriman would agree with you - see his 2 fund portfolio. Small cap value tilt theoretically should increase your returns over the long haul. Ben Felix and Rick Ferri also have a SCV tilt in their portfolios too. - How To Money Podcast #734 – Turning Thousands Into Millions with Paul Merriman. Excellent discussion of 2 fund portfolio: TDF and a tilt to SCV (AVUV is the best) – at 10-20-50%. This will give an additional 2% gain in the long run, and SCV runs counter to S&P500 during large drops. - Paul Merriman’s 2-fund strategy using SCV https://www.paulmerriman.com/2-funds-for-life-update-2023#gsc.tab=0

zel_bob

Right haha I’d like to learn more about investing in general. I know I’m young and can handle a lot of fluctuations and I saw today that 7% of the TDF is in bonds and I was very confused as to why. I plan to keep changing the investments to fairly risky

DrRiAdGeOrN

roughly after the first 100k, but depends on your investments, TDF's its a bit more imo due to their conservative bond allocation.

fn_gpsguy

It depends on your risk tolerance. If you are risk adverse, go with the TDF’s. I chose the DIY route, since I wanted more exposure to equities. With downturns in the market, my paper losses were higher than if I had gone with a TDF. But I rode out the bad times and was happy with my final results. I recently rolled the account over to an IRA where I will have a lot more investment options.

Cruian

>All or nothing can’t encompass everything What is missing from let's say VFFVX? >Reminder: I said invest within it. I do. Just don’t put all your eggs into that baskets. A TDF isn't really just one basket. It's basically 3 baskets (US, ex-US, bonds) in one wrapper.

throwawayinvestacct

It wouldn't be 'unwise' for any particular reason, it would just mean that instead of having a portfolio of whatever splits the TDF holds, you'd have a portfolio of that *that is then weighted towards US large cap stocks*. If that's what you want, great. If not, don't do it.

UnluckyChums

That’s a wholly personal decision that depends on what you want to do. What’s the reason you chose the TDF? If it was because you wanted to be at market weight, then yes, VOO would be contrary to your goals. If you want to match your TDF allocation, there isn’t really any reason to not also do the TDF in the brokerage (well, there are some potential tax implications that you should read up on, but $100 a month won’t result in a massive tax liability). You could also do a VT/BND mix or VTI/VXUS/BND mix to accurately match the TDF allocation while letting you tweak it a bit if desired. Or even omit bonds entirely if you find that risk acceptable, since you’re presumably a few decades out from retirement. If you only chose the TDF because you wanted to take a hands off approach, then VOO isn’t *necessarily* a bad choice - it’d just overweight your S&P allocation. Figure out what your goals are and go from there.

UnluckyChums

> Is it worth opening a brokerage account just to invest 100 a month? Is that too small of an amount to make it worthwhile? If you can afford to do so, $100 a month is better than $0 a month. Will probably want to max out other tax-deferred or tax-advantaged options first (IRA/Roth if you aren't already matching it, 401k if available, HSA, 529, etc) unless your specific tax situation and investment goals would have it make sense to do otherwise. > Also, I remember reading that if I have a target date fund I should make this my only investment because anything I add will throw off the balance. This only refers to what I have in the Roth correct? This doesn’t apply to any investment outside of a roth, correct? You should be viewing all of your investment accounts as a single portfolio. Since you're in a TDF in your Roth, I'm assuming your intention is to stay at market weight, and that goal should apply across all of your accounts unless you want to intentionally change your allocation. As an example, having $1000 in a TDF in your Roth = you're consistent with market weight. If you then open the brokerage and put $1000 into VOO, you'd then overweighted in the S&P by $1000.

Cruian

>Currently I have a Vanguard Roth IRA with about ~50/50 split into VLXVX and VTSAX I'd use VTWAX instead of VTSAX if you insist on holding a TDF + something else. >VFIAX Is unnecessary as it is fully contained within the TDF, VTSAX, and VTWAX. If you want to go even more aggressive, look into factor investing. Factor investing starting points: • https://www.investopedia.com/terms/f/factor-investing.asp • https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/fidelity/fidelity-overview-of-factor-investing.pdf (PDF)

SlowDoubleFire

Well, why did you choose this particular allocation of US/International/Bonds? That's the root cause of the relatively low performance. Also, a Target Date fund is mostly just a three-fund portfolio with automatic adjustment of the allocations. Is there a reason you're choosing a different allocation than what's currently in your TDF?

teetervt

Thanks. I ended up moving 80% to a TDF that is mostly cash (I have limited options with my plan).

CertifiedBlackGuy

You might be referring to TDF, but most mutuals have similar ERs to their ETF counterparts. Not only that, but I don't trust a source that can't tell the difference between an Index Fund, Mutual Fund, or Exchange Traded Fund 🤷

cdude

Everyone has their own risk tolerance. Some people stick with TDF only while others pick a handful of stocks. If you want to diversify then go for it. Remember the saying: Concentration builds wealth while diversification helps preserve wealth. You reduce risk but you also reduce gains. The S&P 500 is simply a sweet spot for most people. If your risk tolerance is lower, you do you. I don't personally care about your financial well-being to try and change your mind.

grey_wulff1

Not the OP but to break in, I rolled 401K over to Fidelity IRA. I found similar index TDF and bought 6k shares in the TDF I chose, which put all of my rolled over cash back in. Correct move?

what_wereallthinking

I'm single, recently divorced, and reviewing my (new) financial situation with fresh eyes. I'm 34yo in a VHCOL center. * 120k in cash, currently parked in MM at 5.3% * 100k 401k in Fidelity TDF, 15% paycheck goes there (including match) * 45k in a Roth No debt, and aside from a couple vehicles and a cat, no material assets either. I live alone, rent for 2700 and take home 6500/month. I save about 1500 a month right now but hoping to bump that this year to 2500 w pay raise. I'd like to buy a condo, or something larger if I found a new partner in a few years. With rates high, I have just parked my divorce finances in (basically) a HYSA for now, but want to figure out how to invest the after tax cash for a 3-5 year timeframe. Some equity exposure would probably(?) be good, but what ratio should I be going for? like 20-30% VTSAX and keep the rest as is (MM rates being better than bond yields anyway?) help appreciated, or any general financial advice for someone in my position.

kronco

The Vanguard target date funds (TDF) are pretty easy to look at and see what they do. 2055 (30 years out) breakdown: [https://investor.vanguard.com/investment-products/mutual-funds/profile/vffvx#portfolio-composition](https://investor.vanguard.com/investment-products/mutual-funds/profile/vffvx#portfolio-composition) Vanguard seems to allocate more to stocks then other TDFs, though. And they have people paid to over-think it as their full time job :)

Sudden_Feedback_2194

I agree for the most part. But if you take the average 20 or 30 year old... they probably don't even know what they're holding in their 401k, or if they even have a 401k, or what a 401k even is. And if they have one, they likely hust chose a target date fund because they have no idea how the market works, what annualized returns to expect, etc. The average 20 year old doesn't know jack shit about finances... so when they get a job and they go into HR and they're selecting their funds... the HR rep says "most people just select a target date" and the 20 year old jumps on the band wagon not knowing that the 6 to 8% gains from that TDF are subpar....

fayeznajeeb

Just take a look at any TDF and their glide path. You can use that and do it yourself. I prefer TDFs due to how easy they are and I'm at Vanguard.

Sudden_Feedback_2194

They said AVERAGE. You, being here, on an investment sub, probably investing in something other than a TDF, are not the average....

DaemonTargaryen2024

No knowing for sure of course, but the TDF is globally diversified. Usually a better bet in the long term despite the recent US outperformance. Then again it's hard to call 100% 500 index a "bad choice"

burntoutCFI

I just thought it'd have better returns than the TDF? Or did I overthink that hehe

DaemonTargaryen2024

Why did you switch from the TDF to VINIX in the 401k?

Odd-Ear8840

How are you able to invest in individual stocks? My company doesn't allow anything other that handful of TDF's and mutual funds

Cruian

Realize that you be taking on uncompensated risk though by doing that (going to single country) and ignoring smaller caps and international. Long term had tended to favor smaller over large (S&P 500) and there's routinely periods where the US is trailing behind ex-US. The TDF some is a fully diversified portfolio in one: it has the US total market, ex-US markets, and bonds. Only the bonds part (which for the farthest out TDFs will likely be 10% maximum) is more conservative than S&P 500, the rest is either equally as or more aggressive.

the_leviathan711

I'd just put 100% in the Vanguard TDF since that's a very good TDF. Otherwise you're overlapping your funds left and right. Also chances are this will be better for you if you do traditional instead of Roth.

junger128

You mention you’re already investing in a TDF. I think a reasonable approach would be to just mirror that TDF in your taxable brokerage account.

dma283

Husband moved his 401(k) balance from a target date fund to a cash position in 2022 based on the advice of his company's tax/financial consultant. However my husband never thought to ask when to invest it back into a TDF. With the market being so high now, is it bad timing to reinvest it into a TDF now? He has about $100k in his 401(k) and he's 34.

speedingmedicine

Just pick a TDF close to when you think you'll retire. It'll adjust risk based on your age. That being said this is a casino and if you don't enjoy frostys and baconators you should head on out.

leaning_on_a_wheel

Which is totally true, but that doesn’t mean the stock price will never go down. I recommend checking out this sub’s resources, but basic investing advice is to first keep emergency savings, roughly 6mo of your average expenses, in a HYSA. Then start maxing out an IRA with index funds or a TDF. Then open a regular brokerage and continue into index funds. Once you’re well established doing that, consider putting a small % of your portfolio into individual stocks. Ofc this is not perfect catch all advice for everyone, but most would agree you jumped ahead several steps with your purchase.

DaemonTargaryen2024

What's the full name and expense ratio of this TDF?

Swred1100

https://www.morningstar.com/funds/why-biggest-target-date-funds-have-underperformed https://www.adviserinvestments.com/adviser-fund-update/target-date-fund-underperformance/ https://realinvestmentadvice.com/why-target-date-funds-fail-investors-a-3-trillion-delusion/ Additionally, the average fee of a TDF is 0.52%, compared to broad market funds that many are below 0.1%. Additionally additionally, and perhaps more important than anything else - why on earth are you so angry??? You don’t need to tell me why, just think about why a comment on Reddit made you so mad, and try to fix whatever that reason is.

GusTheProspector

This is most likely the answer. Doesn’t make sense that a TDF would be down 98% in two and a half months with the stock market booming.

TheRealJYellen

Oh, gotcha. I didn't realize that this was a bank IRA that doesn't support trading. How's your bond allocation? Usually if someone wants to use their money within \~7 years, I'd go with bonds so you can count on it being there. It sounds like you have a larger portfolio though, so you'll want to see how this $4k fits in to the overall picture and let that drive your allocation. From the sounds of it, you're already in a TDF (2 really, 2030 and 2035) so I would be inclined to park this $4k in the same or similar fund. Your decision here will be driven by what you want from this chunk of money. If you want this to grow for years and be the last thing you withdraw before death, put it in stocks so that it can return the highest amount. VT would be a great ETF for this, or it's equivalent mutual fund is VTSAX I think. If you would rather pull the money upon retirement, use bonds to help it hold it's value. I want to say that VBND is the vanguard long term treasury ETF, but I'm not sure and I don't know the mutual fund equivalent. All in, if you're this close to retirement, I'd encourage you either hire a pro or do a lot of research about how to structure your portfolio. You probably want to start building a bond tent in the next few years as well as considering RMDs, backdoor roth conversions and plenty of other things I can't cover here. Hopefully that's enough google terms to start your research.

John_Crypto_Rambo

No one is pushing crypto here. Are you pushing brews? https://www.nber.org/system/files/working_papers/w29559/w29559.pdf OP if you want to read more about why TDF funds are too conservative dive in. >We find that the consumption-equivalent losses from using an age-dependent rule as embedded in current target-date/lifecycle funds (TDFs) are substantial, around 2 to 3 percent of consumption, despite the fact that TDF rules mimic average optimal behavior by age closely until shortly before retirement. >This somewhat surprising result stems from the fact that TDFs tend to decrease equity shares by too much as people age, so that the benefits of a constant equity share of 2/3 for older households is significant, and outweighs the benefit of the TDF guidance to hold higher equity shares early life.

Cruian

Exactly. With a properly diversified portfolio, there will always be parts over performing others and parts under performing others. But which parts fall into each change from time to time. With a TDF, you are engaged your always have the winners covered no matter where they are. Then not everyone can stomach massive drops as retirement is approaching or in retirement.

bkweathe

Which investment most closely resembles the S&P500? I don't know Am I better off continuing to just put it into the target fund? Probably A lot of people have claimed that TDFs are too conservative for a young investor. I disagree, though it does depend on the fund & the investor. Bonds account for very little of the difference in performance between an all-US-stock portfolio & many TDFs designed for young investors. Bonds have had little impact on the performance of these performance TDFs; it's mostly been the international stocks. Adding international stocks doesn't make a fund more conservative. Historically, US stocks & international stocks have taken turns outperforming each other. US stocks have dominated recently, but that tide could turn at any time. I'm most familiar with Vanguard's TDFs, so I'll use them as an example. I've never invested in one, but they're a great choice for a lot of investors who value convenience & are willing to pay a little bit for it. Vanguard TDFs start out with a 90/10 stock/bond allocation & stick with that for many years before starting to gradually shift more towards bonds twenty-five years before the target date. The difference in performance between a 90/10 portfolio & a 100/0 portfolio is usually pretty small, but the difference in risk is usually much larger. This makes it much easier for an investor to hold onto the TDF through a bear market instead of selling in a panic, a move that would cost much more than the performance difference. For a US-only portfolio, over the last 30+ years, the performance difference has been less than 0.4% CAGR. However, the risk (standard deviation) difference has been about 1.5%. (I expect longer time periods would show similar results.) 22 years into this comparison, the 90/10 portfolio was slightly ahead. Only the longest bull market in US history created much of a gap. Why then, you may ask, have funds like Vanguard Total Stock Market Fund (VTSAX & VTI) beaten Vanguard's TDFs by such a large margin recently? The answer is not bonds; it's international stocks. So, pick an all-US-stock portfolio (total market or S&P 500) over a TDF if you like. But please understand that the TDF is only slightly more conservative & has its own advantages. Of course, past performance is not an indicator of future results. https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&mode=1&timePeriod=2&startYear=1972&firstMonth=1&endYear=2023&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&asset1=TotalStockMarket&allocation1\_1=100&allocation1\_2=90&allocation1\_3=54&asset2=TotalBond&allocation2\_2=10&allocation2\_3=10&asset3=IntlStockMarket&allocation3\_3=36&asset4=GlobalBond I didn't include international bonds in my analysis because their impact on the portfolio is small. Also, the comparison period would have been much shorter because some years of data are not available for international bonds.

John_Crypto_Rambo

I’m not a huge fan of TDF funds.   https://www.fa-mag.com/news/fidelity--vanguard-tdfs-have-underperformed-balanced-funds--morningstar-says-74223.html

brewgeoff

The Russell 3000 would be the closest to what you’re looking for. For people who only speak vanguard it is very similar to VTI. The Russell 1000 growth would be somewhat similar to QQQ (both large cap growth funds). However, you were correct when you asked if you would be better off just using the target date fund. The construction of those funds is built on mountains of evidence about how to properly grow money before retirement and reduce risk as you get closer to retirement. Also, if you aren’t familiar with what the Russell 1000 or 3000 is, you should probably just use the TDF.