Investing on Target
Vanguard's retirement funds take on more risk seeking more reward.
For years, Vanguard's target-retirement funds have been Caspar Milquetoasts. Bonds, bonds and more bonds were the order of the day for the cautious wizards who engineered the funds. Now the wizards have turned adventurous. Instead of offering some of the most conservative target funds, Vanguard will soon offer funds that contain more stocks than the funds of archrival Fidelity.
Vanguard's Target Retirement 2015 fund, recently 45% in stocks, will invest two-thirds in stocks. The 2025 fund, 56% in stocks, will allocate 82.5% to stocks. All funds maturing in 2035 or later will contain 90% stocks. Vanguard is also dedicating a bit of its stock allotment to emerging overseas markets.
Everyone knows stocks return more than bonds -- generally about twice as much over the long haul. But stocks bounce around a lot more than bonds, and Vanguard feared investors would abandon their funds when the stocks hit rough water. After conducting new research, says Vanguard's Catherine Gordon, the company believes stock-heavy funds are "a better fit with most investors' preferences and tolerances for market risk."
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Vanguard isn't the only major firm tinkering with its retirement funds. Fidelity is also tweaking its mix, albeit only in its four target funds dated 2000 through 2015. Those funds are for people who are already retired or retiring within ten years. Each of Fidelity's four Freedom funds has increased its stock holdings by between three and five percentage points. The 2005 Freedom fund now has 50% of assets in stocks, and the 2015 fund has 58%.
For investors, target funds are simplicity itself. All you do is pick the fund that ends in the year closest to your retirement. Then add money monthly and watch it grow.
The trick is to find a well-constructed target fund. On that score, the target funds of Fidelity, T. Rowe Price and Vanguard all look solid.
-
Stocks Chop as the Unemployment Rate Jumps: Stock Market TodayNovember job growth was stronger than expected, but sharp losses in October and a rising unemployment rate are worrying market participants.
-
Should You Renew Your CD?With rate cuts impacting earnings, we examine if now is a wise time to renew CDs.
-
7 Ways to Plan Now to Save on Medicare IRMAA Surcharges LaterUnderstand the critical two-year lookback period and why aggressive planning before you enroll in Medicare is the most effective way to minimize IRMAA.
-
Best Banks for High-Net-Worth Clientswealth management These banks welcome customers who keep high balances in deposit and investment accounts, showering them with fee breaks and access to financial-planning services.
-
Stock Market Holidays in 2025: NYSE, NASDAQ and Wall Street HolidaysMarkets When are the stock market holidays? Here, we look at which days the NYSE, Nasdaq and bond markets are off in 2025.
-
Stock Market Trading Hours: What Time Is the Stock Market Open Today?Markets When does the market open? While the stock market has regular hours, trading doesn't necessarily stop when the major exchanges close.
-
Bogleheads Stay the CourseBears and market volatility don’t scare these die-hard Vanguard investors.
-
The Current I-Bond Rate Is Mildly Attractive. Here's Why.Investing for Income The current I-bond rate is active until April 2026 and presents an attractive value, if not as attractive as in the recent past.
-
What Are I-Bonds? Inflation Made Them Popular. What Now?savings bonds Inflation has made Series I savings bonds, known as I-bonds, enormously popular with risk-averse investors. How do they work?
-
This New Sustainable ETF’s Pitch? Give Back Profits.investing Newday’s ETF partners with UNICEF and other groups.
-
As the Market Falls, New Retirees Need a Planretirement If you’re in the early stages of your retirement, you’re likely in a rough spot watching your portfolio shrink. We have some strategies to make the best of things.
