{ "media_type": "text", "post_content": "401k - should I be in target retirement 2060 or just 100% into total stock mkt index? Looking at the last 1, 3, 5 years it shows that total stock mkt has beat the target retirement by double", "post_id": "5f3a8a06a88d230023d2d12f", "reply_count": 31, "vote_count": 4, "bowl_id": "5e6fe1c31f5e51001d267e46", "bowl_name": "Coronavirus Work-life" }

401k - should I be in target retirement 2060 or just 100% into total stock mkt index? Looking at the last 1, 3, 5 years it shows that total stock mkt has beat the target retirement by double

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It depends on how risk adverse you are OP. The 2060 target funds have a decent allocation % to equities, but not 100%, so it’s better for moderate risk takers. If you are okay taking on more risk, then put the money 100% in equities and manually change the percentage over the years. But remember, you are taking on a lot more risk and don’t have the fixed income fall back if the market tanks (again). Target funds are not a scam, like others are claiming, they are smart if you want a good diverse set of investments

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Remembering back to my MBA Capital Markets class, a 90/10 portfolio actually outperforms a 100% equities portfolio over many time periods, even when stocks are going up. Basically any high volatility period 90/10 will outperform. It’s because a 90/10 rebalances in a way that effectively automatically buys low / sells high. So when stocks are down you will sell bonds (when they are presumably up) to rebalance into stocks, and when stocks are up you will sell those to buy bonds at a bargain, again to rebalance. So eg a 90/10 allocation would have sold stocks in February, bought them back in March when the market tanked - without you having to predict anything. And that would have outperformed just sitting 100% in equities through it all. The above is often true on an absolute basis, but is always true on risk adjusted basis.

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Target retirement is a scam for financially illiterate people. Do total stock market and adjust manually later on to save thousands in fees over your lifetime.

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I just looked at Vanguard’s target date funds’ Annual Report. On the page numbered 3, it says: “A typical fund’s expenses are expressed as a percentage of its average net assets. The Target Retirement Funds have no direct expenses, but each fund bears its proportionate share of the costs for the underlying funds in which it invests. These indirect expenses make up the acquired fund fees and expenses, also expressed as a percentage of average net assets.” https://personal.vanguard.com/funds/reports/q3080b.pdf?2210158373

Stock market The 2060 has a mix of equities and bond and shifts overtime to become more bond heavy. Basically trying to adjust the risk of portfolio as you get closer to 2060. You can manually change that mix yourself later in life if you want

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You most likely will also save on fees if you switch to an index fund, which greatly compound over your career.

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When exchanging one investment on fidelity - is there a fee associated with it? I want to move 30k out of TR2060 and buy into total stock mkt

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Yes there is a fee for investing money in the other stock market fund

Better than seeking retirement investment advice of FB is the bogleheads.org site forum. It changed my approach and helps me sleep better at night. Its a whole community of investors that follow the philosophy of Jack Bogle (founder of Vanguard and "father" of the index fund). They have community developed backtesting tools as well.

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There’s no “correct” answer, it depends on your own personal risk tolerance and retirement goals. Stocks give you higher upside with higher risk, target fund is less risky, but has lower upside. If you can’t stomach huge downturns, the target fund is better for you. If you want the highest expected return, go stock market.

100 minus your age is a good percentage to have in equities.

Yep, my bad. Read that too fast and its my day off. Sorry!

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My fiancée works as a retirement specialist, and the way she balances my portfolio is that she always do 5 to 10 percent bond and treasury notes. 65 to 75 percent US stocks usually spread amongst large, medium, and small cap. The risk tolerance should be the more risk adverse you are more large cap you should have in the mix. The remaining 15 to 20 percent ypu have left, she invests in foreign market funds like emerging funds, can't ignore China lol

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