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@MikeM, Pretty much agree with everything you’ve said here. These are not normal times. Utter chaos in DC. Self-inflicted trade wars. Predictable backups at airport security lines. Terminals closing. Payless paydays for many government workers - now including the FBI and U.S. Coast Guard. Enough to make one forget that the European Union is also in upheaval. Now - let’s toss in the fact that those bonds balanced funds hold are very susceptible to a sharp decline in value should rates spike. With only 2.7% on the 10-year Treasury, bonds themselves constitute a risk asset.@Hank, these are not normal times when HSGFX has a better 1 year return than PRWCX :) I tend to agree with @wxman123. These long/short or market neutral funds generally under-perform over time compared to a good balanced fund. So moral of the story is simply, they are not worth holding over a long period of time. And if you are going to trade in and out of them, the manager has to time the market correctly and you have to time when you think holding the fund makes sense - correctly. Tough game.
“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.
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