lifecycle and target funds


J

J.Lef

Just a question. I know these two type of similar funds, are being
heavily introduced and promoted, but are they a bad choice of funds?
I basically wanted to set up my investments and forget it, but still
dont want to get taken either.
I have a five percent match at work in a 457b tax deferred program,
and I contribute 10 percent of my own, for a total of 15 percent. I have
this money invested in a lifestyle type 2040 fund.
I fully fund a roth ira, with the vanguard 2045 fund.
I have 5 percent of salary, also go into a guaranteed 8.25 percent
fund(no expenses), which goes as a voluntary supplement to boost my pension.
This is all I can invest for now and the foreseeable future. So
its a total of 20 percent of my salary(15 percent of conribution is mine),
plus a fully funded roth ira.
Can I do a lot worse, then leaving this money in these life style
or year dated mutual funds?
Most of these funds dont have a long track record yet to go by
either?

Thanks
 
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B

Bucky

J.Lef said:
Just a question. I know these two type of similar funds, are being
heavily introduced and promoted, but are they a bad choice of funds?
I basically wanted to set up my investments and forget it, but still
dont want to get taken either.
I think they're excellent for people who want to do passive investing.
One thing that's annoying about Vanguard's index funds is that they
have a $10,000 minimum to avoid fees. So if you're trying to allocate
between 5 funds, you'll need $50K total. That's where these life-cycle
funds are great, because they are kind of loophole for the $10K
minimums.

As far as index allocation funds go, I don't think you can beat
Vanguard, because they do not charge anything above the underlying
funds expense ratios.
 
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D

dumbstruck

I think they are great in theory, but too timid and ultraconservative
in practice. When I have checked their returns they have been near
zero due to sticking to retro standbys of large cap growth and too long
term bonds, which have been predictibly horrid for some years now.

There are other hybrid funds with a more mildly conservative strategy,
such as diversifying with international and maybe some less
arthritic-huge-cap, in funds like ffnox or fgblx. They don't increase
bond holdings later on, but this could be better anyway according to
some worried about inflation.
 

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