Vanguard recognized an unmet need from investors for a simple, balanced investment fund to reachtheir retirement goals. Vanguard made an early entrance into the target-date fund arena by launching its initial selection of Vanguard Target Retirement Funds in 2003, eventuallyadding moretarget dates over later years.
Each fund in the target-date series holds an underlying mix of Vanguard index funds. Due to the composition of index mutual funds and the Vanguard management style, the Vanguard Target Retirement series of funds has a low expense ratio ranging from 0.21% to 0.23%.
The Strategy of Target-Date Funds
Target-date funds offer investors an easyway to own a diversified portfolioby making asingle mutual fund selection that changes over the years to reflect the investor's capacity risk.
For a long-term target date, the fund comprisesa more aggressive mixof underlying equity index funds in the early years. As the target date grows nearer, it isadjusted toward a more conservative mix. When a fund reachesits target date, the underlying portfolio will reflect that of the Vanguard Target Income Fund.
The funds do not guarantee a certain return at their end date, but they do automatically reduce the amount of risk in the portfolio as the date the funds will be needed draws nearer.
Vanguard Target Retirement Funds
The current lineup of Vanguard Target Funds includes the Vanguard Target Retirement Income Fund and Target Retirement Funds2015, 2020, 2025, 2030, 2035, 2040, 2045, 2050, 2055, 2060, and 2065. The list begins with the most conservative fund and ends with the most aggressive fund. For example, the long-term horizon for the 2060 fund allows the portfolioto be heavily weighted in equities witha small percentage of bonds, while the 2015 fund would be mostly bonds and very few equities.
Vanguard Target Retirement Fund 2045
The Vanguard Target Retirement Fund 2045 is a good example of reviewing current performance and portfolio composition. The fund has a target date range of 2041 to 2045 and holds four Vanguard index funds. The underlying funds and weighting as of June 2021are as follows:
- 53.4% in the Vanguard Total Stock Market Index Fund
- 36.0% in the Vanguard Total International Stock Index Fund
- 7.5% in the Vanguard Total Bond Market II Index Fund
- 3.1% in the Vanguard Total International Bond Index Fund
Because the time horizon for this fund is 24years (as of 2021), it holds more equity index funds and a small portion of bond index funds. Investors who plan to retire between 2043 and 2047 could consider this fund. If they want to take less risk, they can select from earlier target dates.
The SEC yield for the fund is 1.51%, as of May 31, 2021. The inception of the fund was in 2003, so potential investors can consider the strength of the fund's performance over more than 10 years. The average annual return(AAR) for 10 years was 10.39%, and the fund has a four-star rating from Morningstar for its three- and five-year performance.
The Success of Vanguard Target Retirement Funds
Vanguard has found success with the series of target-date funds by offering a lowexpense version for the retirement market. The initial investment minimum is $1,000, so the funds appeal to individual investors and 401(k) participants. The Vanguard Group offers a well-managed fund selection with a strong performance history.The automatic rebalancing of the portfolio is also an important feature.
The Pension Protection Act of 2006 included target-date funds as a qualified default investment alternative (QDIA). Retirement plan sponsors can use these funds as a default investment for participants who do not make an investment election.
For investors who want a one-stop investment selection or a set-it-and-forget-it approach to investing in their retirement, the Vanguard Target Retirement Funds are an easy choice. Theyare especially appealing to young investors who are just starting a career and may not have the time or expertise to critique various investment choices.
FAQs
Are Vanguard Target retirement funds a good idea? ›
Over the years, Vanguard target retirement funds have put more focus on higher-quality bonds and Treasury inflation-protected securities (TIPS) compared to other fund families. This approach can provide better protection of capital against volatility and real value erosion.
Is Vanguard Target retirement 2025 Good? ›The fund has returned -13.21 percent over the past year and 3.74 percent over the past three years. The fund has produced above-average results for some time, and is still one of the least expensive target-date funds in the industry.
Is Vanguard Target retirement 2050 Good? ›Target-date funds for investors retiring in 2050 have returned 8.48 percent a year for the past five years, compared to nearly 13 percent for funds tracking the , according to Morningstar. But this has been a period of strong stock growth, and TDFs generally do better than the S&P 500 when stocks fall.
Is Vanguard Target retirement 2060 Good? ›Vanguard Target Retirement 2060 Fund (VTTSX)
Vanguard's line of retirement funds offer excellent diversity at a low cost. The Vanguard Target Retirement 2060 Fund charges an expense ratio of just 15 basis points.
He said that in his will, he directed how he wants the money he leaves for his wife to be invested: "Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's.)"
What Vanguard fund is best for retirees? ›- Vanguard S&P 500 ETF (VOO)
- Vanguard Total International Stock ETF (VXUS)
- Vanguard Value ETF (VTV)
- Vanguard Growth ETF (VUG)
- Vanguard Mid-Cap ETF (VO)
- Vanguard Dividend Growth Fund (VDIGX)
- Vanguard Total Bond Market ETF (BND)
It was caused by a huge capital gain payout. Basically, investors were all paid a large chunk of cash and the share price was lowered to reflect that payment. To illustrate this, remember that the growth of your investment value in a mutual fund is comprised of two parts: Share Price.
Which retirement fund is best? ›- IRA plans.
- Solo 401(k) plan.
- Traditional pensions.
- Guaranteed income annuities (GIAs)
- The Federal Thrift Savings Plan.
- Cash-balance plans.
- Cash-value life insurance plan.
- Nonqualified deferred compensation plans (NQDC)
The fund is part of Morningstar Moderate Target Risk category. On a ten-year basis, as well as over shorter time frames, the fund has delivered a higher return than the category average. One factor in Vanguard's favor: The firm makes a point of keeping expenses low, which means investors keep more of the return.
Can you lose money with Vanguard? ›Vanguard Cash Reserves Federal Money Market Fund and Vanguard Federal Money Market Fund: You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so.
What is a good Vanguard portfolio? ›
What are the best performing Vanguard funds? Based on 10-year average annual returns, the top-performing Vanguard fund is the actively managed U.S. large-cap growth fund (VWUSX) at 20.74%. The passively managed large-cap growth index fund (VIGAX) comes in second with 19.32%.
Is Vanguard Target retirement 2030 good? ›Performance. The fund has returned -13.94 percent over the past year, 4.22 percent over the past three years and 5.50 percent over the past five years.
What is the average return on Vanguard? ›...
100% Equity.
| Average annual return | 10.29% |
|---|---|
| Years with a loss | 26 of 94 |
Don't get distracted from your long-term investing goals.
With the stock market's rough start to 2022, many people may wonder if now is the right time to invest. Simply put, the answer is yes.
- Tax-free Bonds. Initially tax- free bonds were issued only in specific periods. ...
- Kisan Vikas Patra (KVP) ...
- Corporate Deposits/Non-Convertible Debentures (NCD) ...
- National Savings Certificates. ...
- Bank Fixed Deposits. ...
- Public Provident Fund (PPF) ...
- Mutual Funds (MFs) ...
- Gold ETFs.
- The Best Vanguard Mutual Funds of July 2022.
- Vanguard LifeStrategy Growth Fund (VASGX)
- Vanguard FTSE Social Index Fund (VFTAX)
- Vanguard Dividend Appreciation Index Fund (VDADX)
- Vanguard Total Stock Market Index Fund (VTSAX)
- Vanguard Intermediate-Term Bond Index Fund (VBILX)
The old rule of thumb used to be that you should subtract your age from 100 - and that's the percentage of your portfolio that you should keep in stocks. For example, if you're 30, you should keep 70% of your portfolio in stocks. If you're 70, you should keep 30% of your portfolio in stocks.
What are the top 5 Vanguard funds? ›- Vanguard 500 Index Fund (VFINX)
- Vanguard Total Stock Market ETF (VTI)
- Vanguard Dividend Appreciation ETF (VIG)
- Vanguard Total International Stock ETF (VXUS)
- Vanguard FTSE All-World ex-U.S. ETF (VEU)
- Vanguard Total World Stock ETF (VT)
- Vanguard Real Estate ETF (VNQ)
- Goldman Sachs Target Date 2030 Portfolio.
- Prudential Day One 2030 Fund.
- Principal LifeTime 2030 Fund.
- Fidelity Flex Freedom Blend 2030 Fund.
- BlackRock LifePath® Index 2030 Fund.
- JPMorgan SmartRetirement® 2030 Fund.
- Fidelity Freedom® Blend 2030 Fund.
Vanguard Target Retirement 2030 Fund uses an asset allocation strategy designed for investors planning to retire between 2028 and 2032.
What is Vanguard Target Retirement 2030 Trust II? ›
Objective. Vanguard Target Retirement 2030 Trust II seeks to provide capital appreciation and current income consistent with its current asset allocation.
Are Target retirement funds a good choice? ›They are a good option for investors who are hands off and who wouldn't rebalance their investments on their own. Target date funds are also good for DIY investors, because they are a more comprehensive strategy than picking on past performance, which is the way do-it-yourselfers often pick investments.
Is Vanguard Target retirement 2030 good? ›Performance. The fund has returned -13.94 percent over the past year, 4.22 percent over the past three years and 5.50 percent over the past five years.
Is Vanguard Target retirement 2045 good? ›The fund is part of Morningstar Moderate Target Risk category. On a ten-year basis, as well as over shorter time frames, the fund has delivered a higher return than the category average. One factor in Vanguard's favor: The firm makes a point of keeping expenses low, which means investors keep more of the return.
Which target retirement fund should I choose? ›You pick a fund with a target year that is closest to the year you anticipate retiring, say a "2050 Fund." The closer a fund gets to its target date, the more it focuses on assets that traditionally have a lower risk profile, such as fixed income, cash and cash equivalents.
What are the disadvantages of target-date funds? ›Advantages of target-date funds include low minimum investments, professionally managed portfolios, and low maintenance for investors. Disadvantages include a one-size-fits-all approach, higher expense ratios, and a lack of diversification.
What's wrong with target-date funds? ›The equity allocation in most target date funds declines to about 50% at retirement and then continues to decline to around 30%-40% once the glide path flattens out. According to the findings of the research, this allocation is too low for most retirees.
What are 2 benefits of investing in a target-date fund? ›Key Takeaways. Target-date funds provide a simple way to save for retirement. They offer exposure to a variety of markets, active and passive management, and a selection of asset allocation. Despite their simplicity, investors who use target-date funds need to stay on top of asset allocation, fees, and investment risk.
Why are Vanguard retirement funds down? ›It was caused by a huge capital gain payout. Basically, investors were all paid a large chunk of cash and the share price was lowered to reflect that payment.
What is the best 2030 target date fund? ›- Goldman Sachs Target Date 2030 Portfolio.
- Prudential Day One 2030 Fund.
- Principal LifeTime 2030 Fund.
- Fidelity Flex Freedom Blend 2030 Fund.
- BlackRock LifePath® Index 2030 Fund.
- JPMorgan SmartRetirement® 2030 Fund.
- Fidelity Freedom® Blend 2030 Fund.
What is Vanguard Target Retirement 2030? ›
Vanguard Target Retirement 2030 Fund uses an asset allocation strategy designed for investors planning to retire between 2028 and 2032.
What is the average return of a target-date fund? ›For instance, the average 2020 target date fund now has about 46% in bonds, 42% in stocks and the remainder in cash and other investments, according to Morningstar Direct. The average stock-bond mix for 2025 target date funds is 47%-39%.
Is Vanguard financially stable? ›About Vanguard
5 It has 209 U.S. funds as of 2021. 6 It has one of the largest bond funds in the world as of 2021, the Vanguard Total Bond Market Index. Vanguard prides itself on its stability, transparency, low costs, and risk management. It is a leader in the area of offering passively managed mutual funds and ETFs.
*Vanguard Target Retirement Funds average expense ratio: 0.11%.
How do Vanguard Target retirement funds work? ›Vanguard Target Retirement funds are inexpensive, diversified and designed to give you a good, but not guaranteed, investment outcome by some fixed date in the future. They do this by starting with a high equity allocation then dialling down risk by moving more money into bonds as the fund approaches its target date.
What is the average annual 10 year return on this fund? ›| Average Mutual Fund Returns | ||
|---|---|---|
| Category | 2021 Return | 10-Year |
| Intermediate-Term Bond | -1.48% | 2.95% |
| Short-Term Bond | 0.05% | 1.96% |
| Mean | 11.54% | 8.51% |
Do target funds pay dividends? Most target-date funds invest in stock funds and index funds. Dividends from the underlying stocks or other assets pass through to the investor. Most funds pay dividends quarterly or semiannually.