I'm of the opinion that the true test of a Target-date fund would be if it reduces the risk associated with "sequence of returns." Looking into the evidence regarding this issue would be a very important piece of information.
A true test of a Target date fund would be what it exactly holds and how much it's expense ratio is. But any Target date fund will be diversified and should reduce the risk from sequence of returns. Of course the risk may be higher because of the fees and charges or it's active management. Which is I would only recommend an index fund Target date fund
Here's a reason why you might not want to invest in these, or asset allocation funds. The bond component YOU think is being actively managed for risk. So, you'd expect as investment risk for bonds increases, that your active manager might be managing the bond portfolio into lower maturities and higher credit qualities. Well, as a 30 yr advisor I'll tell you .... they DON"T. Why? Watch the best scene of "Margin Call" as the CEO explains why they need to "sell it all" and listen to what Kevin Spacey has to say about "selling it all". The bottom line, the fixed income markets are HUGE, but they are FRAGILE. Since Nov of 2021 we've seen the record breaking credit spread begin to finally widen, and now we see less credit quality bonds start to accelerate losses. If this continues, the market may risk what happened in 2008 when an influx of selling led to a complete lack of liquidity even for high-quality bonds other than us treasuries.
"these"?? Every year that would change with the manager's decision. But Morningstar gives Vanguard Target date funds four stars out of five. I would definitely stick with the target date funds then try to hope I get lucky and get one of the ones that are five stars
Deadly financial warning In retirement the stock market may not perform how you would like it in your first 10 years. Bonds lower your risk and if risk matters to you which it should just before retirement and after bonds can help you.
Using the rule of thumb method, if a bond paying 2% is faced with a market where 4% is the new number, the bond should decline to 82 from 100. Why invest in an instrument where your upside is mitigated by the loss side by a factor of 4x?? Nobody would play that game in Vegas would they? That said, with my clients right now I'm at 30-40% bonds, short term us treasuries, because zero percent beats a loss of 20%. And even when the streets are flowing with bond and stock blood, you can trade a US treasury. Well, it's worked in the past anyways...
@@dagsterblaster4973 while holding a bond fund or Target date fund with Bonds in it bonds may lose money temporarily if rates rise. But in the long term higher interest rates will increase your return. Of course you should never be holding bonds in a longer duration then your need for the money.
The knock is these target date funds would have your portfolio 50%+ in equities when they hit their target date. Way too much volatility for someone in "retirement" so be aware.
Correct I just retired and I am using bonds to fund early retirement and waiting for target date funds to become less stocks over time and fund later retirement
Most experts would recommend you have more than 50% stocks at the beginning of retirement. At the beginning of retirement you should be looking at still a possibility of 30 more years to invest. These Target date funds are based on actual historical data. They just don't nilly willy pick something. If you don't like the target date fund you shouldn't invest in them but you do not want to retire with less than 50% stocks in general
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A smart publication like the WSJ would publish this interview every week. There is no other media that does as good a job as Wealthtrack.
I'm of the opinion that the true test of a Target-date fund would be if it reduces the risk associated with "sequence of returns." Looking into the evidence regarding this issue would be a very important piece of information.
A true test of a Target date fund would be what it exactly holds and how much it's expense ratio is.
But any Target date fund will be diversified and should reduce the risk from sequence of returns. Of course the risk may be higher because of the fees and charges or it's active management. Which is I would only recommend an index fund Target date fund
Slow and steady wins the race.
will you ever begin to enable closed captions???
Here's a reason why you might not want to invest in these, or asset allocation funds. The bond component YOU think is being actively managed for risk. So, you'd expect as investment risk for bonds increases, that your active manager might be managing the bond portfolio into lower maturities and higher credit qualities. Well, as a 30 yr advisor I'll tell you .... they DON"T. Why? Watch the best scene of "Margin Call" as the CEO explains why they need to "sell it all" and listen to what Kevin Spacey has to say about "selling it all". The bottom line, the fixed income markets are HUGE, but they are FRAGILE. Since Nov of 2021 we've seen the record breaking credit spread begin to finally widen, and now we see less credit quality bonds start to accelerate losses. If this continues, the market may risk what happened in 2008 when an influx of selling led to a complete lack of liquidity even for high-quality bonds other than us treasuries.
What would you recommend for someone with no experience in the market to start ??? I currently add 100$ a month in Roth IRA
I wonder how these actively managed target date retirement funds compare against Vanguards target retirement funds, made up of index funds
"these"??
Every year that would change with the manager's decision.
But Morningstar gives Vanguard Target date funds four stars out of five. I would definitely stick with the target date funds then try to hope I get lucky and get one of the ones that are five stars
❤
Deadly financial product. Bond market low yields will kill wealth.
Deadly financial warning
In retirement the stock market may not perform how you would like it in your first 10 years. Bonds lower your risk and if risk matters to you which it should just before retirement and after bonds can help you.
Using the rule of thumb method, if a bond paying 2% is faced with a market where 4% is the new number, the bond should decline to 82 from 100. Why invest in an instrument where your upside is mitigated by the loss side by a factor of 4x?? Nobody would play that game in Vegas would they? That said, with my clients right now I'm at 30-40% bonds, short term us treasuries, because zero percent beats a loss of 20%. And even when the streets are flowing with bond and stock blood, you can trade a US treasury. Well, it's worked in the past anyways...
@@dagsterblaster4973 while holding a bond fund or Target date fund with Bonds in it bonds may lose money temporarily if rates rise. But in the long term higher interest rates will increase your return. Of course you should never be holding bonds in a longer duration then your need for the money.
Target date Funds 😮
The knock is these target date funds would have your portfolio 50%+ in equities when they hit their target date. Way too much volatility for someone in "retirement" so be aware.
Correct I just retired and I am using bonds to fund early retirement and waiting for target date funds to become less stocks over time and fund later retirement
But Bond returns are too low? Still need equities for long term growth of portfolio ?
Most experts would recommend you have more than 50% stocks at the beginning of retirement. At the beginning of retirement you should be looking at still a possibility of 30 more years to invest. These Target date funds are based on actual historical data. They just don't nilly willy pick something. If you don't like the target date fund you shouldn't invest in them but you do not want to retire with less than 50% stocks in general
Horrible allocation