Guest Post on Get Rich Slowly
I’m sure many of you read Get Rich Slowly anyway, but in case you don’t, I’ve got a guest post there today about target date funds.
Investing | Frank Curmudgeon | 
April 27, 2009 1:00 pm
5 Comments
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By bex, April 27, 2009 @ 6:02 pm
good post… I really liked the idea of bootlegging somebody else’s asset allocation strategy, and tuning it to have fewer fees, and less risk.
By hickchick, April 27, 2009 @ 6:25 pm
Lots of readers on Get Rich Slowly seem to think you’re way off base for telling them they might make more money doing their own dirty work.
I wonder if any of them are in the market for a bridge….
By Jack, April 28, 2009 @ 4:52 pm
@hickchick, It’s not that the GRS folks are upset about picking their own asset allocation and adjusting by age, it is that the article assumes that all of the target funds are bad and loaded with fees when it isn’t true. Frank has made a simplifying assumption based on the Fidelity fund and an average expense ratio that he doesn’t cite, and then ignores the Vanguard funds that charge 0.18%. Read comment #2 over on GRS.
Frank could have gone a long way toward making the article better by qualifying his statements and/or noting that some funds, such as the Vanguard funds, don’t follow the rules he is using to set up his example.
By Frank Curmudgeon, April 28, 2009 @ 6:39 pm
I suppose I should have pointed out that Vanguard has low fees, but it is an exception, and as far as I know a solitary one. The average fee for target funds is actually a lot higher than the one I chose to briefly discuss. I did mention that Vanguard had a lot more in stocks than I was comfortable with.
I don’t assume that all target funds are bad, I make the case that they are not the best you can do, but also make it explicit that you could do a lot worse than invest in a target date fund.
By kurt, May 8, 2009 @ 8:59 pm
The Vanguard TR funds are a reasonable option, but I would agree that the stock allocation is too high. If you are forced to use a TR fund which is NOT your actual retirement date to get a bigger fixed income allocation, doesn’t that defeat the purpose? The Fidelity Freedom funds are insanely and needlessly complex, and you should see the garbage target funds Schwab has in my 401K. ER well over 1%, no thank you. Frank’s approach is sensible, it’s simple, and it minimizes costs.