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“Half of all 401(k) accounts now hold 100 percent of savings in a target date fund. Just over 30 percent of overall 401(k) assets are in target date funds ...” (2018).
https://www.forbes.com/sites/johnwasik/2018/11/12/what-it-takes-to-be-a-401k-millionaire/
@Starchild - It certainly appears a good many Americans are using target date funds. But you probably won’t find very many here who have used the funds to any degree. The apparent contradiction is largely explained by the fact that those who actively read / post on a mutual fund investing board probably are the type of investors who prefer to manage their investments directly. In addition, they possess a higher degree of investment knowledge and a higher investment comfort level than the average American.
That 50% participation rate cited in the Forbes article is due in some measure to many plan sponsors using target date funds as the default option in their plans. I’d say that for many who have very busy lives working and raising families these funds are certainly superior to not investing at all or letting their investments sit in a money market fund. That, I think, is the primary rationale behind their existence (along with an additional way for fund companies to garner assets).
Eager to hear to what extent MFO participants use / have used these vehicles. More likely, I think, MFO members may know family members, neighbors, etc. who use them). On a few rare occasions I’ve put money into one or more of Price’s target date funds for shorter periods because the particular holdings were useful at that time and the ER looked attractive. That’s not what they were designed for, of course.
@Ted’s link to Bogle is interesting. I’d certainly agree that bonds no longer offer the degree of protection (against equity sell-offs) they did a couple decades ago when many of these these funds were devised - because of still historically low rates. The recent late 2018 market carnage tended to bear that out. For one, I’m not prepared to write bonds off entirely, thinking there are a lot of hybrid or diversified offerings in bondland which are still worth holding for diversification purposes. (Possibly fodder for another thread?)
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Re: @Starchild’s holding: A glance shows VTTHX (Vanguard Target 2035) invested exclusively in Vanguard’s index funds, with roughly 75% in equities (domestic & international) and 25% in fixed income. It has a remarkably low 0.14% ER. No doubt, the glide slope will soften its (somewhat high) risk profile over the years.
While the article is exclusively about inverse funds, the comments apply as well to what Vanguard is calling leveraged funds as well.[I]nverse E.T.F.s are designed to function as a very short-term trading strategy ...
"These funds are built for short-term speculation. They’re designed to be outliers." ...
“This is trading, not investing,”
To whatever extent the "nanny" complaint has merit, it could have been raised when Vanguard first went NTF on most ETFs:Although TD promoted the new NTF platform’s increase from 100 to “250+” ETFs as an increase in consumer choice, the move marked the defeat of truly open architecture for ETFs.
https://personal.vanguard.com/web/cf/multivariate/experiments/etf/index.htmlWe exclude them for a good reason. Leveraged and inverse ETFs are intentionally designed to be bought and sold within a single trading day, making them extremely speculative in nature. We—and the vast majority of the Vanguard community—prefer to think long-term. It's as simple as that!
You can still buy and sell leveraged and inverse ETFs in your Vanguard Brokerage Account. You'll simply pay the same commissions as you would to trade individual stocks.
there's a 5% load; why pay that?
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