My fund of choice: Vanguard Target Retirement 2035 (VTTHX)
After comparing the possible combinations of mutual funds to satisfy my target asset allocation, I decided that for now, simple is better. In placing all of my IRA funds in Vanguard Target Retirement 2035 (VTTHX), I get great diversification while avoiding any minimum account or custodial fees of any kind. The fund is almost fully invested, with minimal reserve cash, and the holdings are very close to my chosen asset allocation:
Vanguard Total Stock Market Index Fund - 62.1%
Vanguard Total Bond Market Index Fund - 22.0%
Vanguard European Stock Index Fund - 10.8%
Vanguard Pacific Stock Index Fund - 4.7%
That is, approximately 60% US Stocks, 20% International, and 20% Bonds. In addition, the expense ratio of only 0.21% is just that of the underlying funds, there is no additional management fee like many other fund of funds such as from Fidelity. As my account grows, I will definitely exchange this fund to get a more specific asset allocation, but for now I am satisfied.
January 14th, 2005 at 5:41 am
After doing my own evaluations, I think VTTHX is probably the best option in terms of costs and asset allocation. I’m still somewhat torn between Vanguards Target Funds, and T. Rowe Price’s, which are more aggressive.
January 14th, 2005 at 7:04 am
The Vangaurd target retirement funds look really nice, and cheap. I just don’t know if I want that level of disversification yet. I feel like I’d like to stay away from bonds for a bit while I’m young and can handle the risk. But I’m probably going to fund a Roth for 2005, and I’d like to put something tax-inefficient in there, like VBMFX. So I guess what I’m saying is I don’t know yet, but I’ve got the rest of the year to decide, and I may just end up with one of the target retirement funds.
Anyway, glad to see another finance blogger going passive and low-cost with Vangaurd.
January 14th, 2005 at 4:02 pm
I think T. Rowe Price is a good company if you are looking for actively managed funds. The expense ratio of their Retiremnet 2035 Fund (TRRJX) is 0.84%, which is ok for actively managed, but still you’re betting 0.63% every year that they can beat the market. They also don’t charge an additional fund fee on top of the underlying funds, or I guess the expenses are absorbed by the underlying funds.
TRRJX is about 90% Stocks/10% Bonds, which is about the same as the Vanguard 2045 Fund (VTIVX). It looks like TRP is more aggressive relative to years, but it all boils down to what you feel comfortable with.
Tax Efficiency is definitely something to worry about, I agree. For now, I’m not. ‘Cause I’m too lazy to run the numbers vs. avoiding minimum balance fees.
September 8th, 2005 at 4:01 am
Being only 10% in bonds isn’t going to make to much of a difference in the end. I think everyone regardless of age should have a little diversification.