investing

Vanguard Target Retirement 2030 Keeps Its Eye on the Prize

With these retirement-focused funds, staying put is the best strategy.

When the stock market crashes, the hardest thing to do is to do nothing. But target-date fund investors who took that route came out of the sell-off just fine.

Vanguard Target Retirement 2030 (symbol, VTHRX), a proxy for all target-date funds but designed for people with 10 years to go before retirement, returned 0.2% over the past 12 months, including a 24.9% loss from peak to trough in February and March. That beats 71% of all target-date 2030 funds. For context, Standard & Poor’s 500-stock index lost 34% during the winter sell-off.

Target-date funds, which hold stocks and bonds, are designed to help people invest appropriately for retirement. Experts make the investing decisions, rebalance the portfolio when needed and shift holdings to a more conservative mix as you age. The Target Retirement 2030 fund has 67% of assets in stocks, 31% in bonds and 2% in cash.

These funds, fixtures in 401(k) plans, also help save investors from themselves. Most target-date fund investors buy shares with every paycheck, automatically buying at lower prices in down markets. They tend not to sell until they’re close to retirement.

During the historic sell-off, some shareholders did unload a few shares. The net inflow (money coming in, less money going out) in Vanguard’s Target Retirement series, which includes 12 funds, was negative in March by $3.9 billion. That was unusual but modest, given that the firm manages a total of $726 billion in target-date fund assets, says Vanguard spokesperson Carolyn Wegemann.

Kiplinger's Personal Finance

Getty Images

Shareholders who sold missed out on rebalancing moves in March, when portfolios took profits in higher-priced fare to buy low-priced assets in order to keep target allocations intact. Given market volatility, Vanguard rebalanced Target Retirement port­folios, which hold index funds, more than usual. “Sometimes the market was down 10% one day and up 10% the next,” says Marty Klepp, who heads Vanguard’s index strategy team.

Over the long haul, Vanguard Target Retirement 2030 has delivered solid returns. Since its June 2006 inception, the fund has gained 6.0% annualized, better than the 4.9% annualized return in the typical fund with a 2030 target date.

Most Popular

Will Your Stimulus Check Increase Your Tax on Social Security Benefits?
Coronavirus and Your Money

Will Your Stimulus Check Increase Your Tax on Social Security Benefits?

The answer to this question comes down to whether your stimulus check increases your "provisional income."
March 1, 2021
Third Stimulus Checks Are One Step Closer to Reality – How Much Will You Get?
Coronavirus and Your Money

Third Stimulus Checks Are One Step Closer to Reality – How Much Will You Get?

The House passed President Biden's $1.9 trillion stimulus package. While the bill faces hurdles in the Senate, the provisions authorizing another roun…
February 27, 2021
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021

Recommended

Bonds: 10 Things You Need to Know
Investing for Income

Bonds: 10 Things You Need to Know

Bonds can be more complex than stocks, but it's not hard to become a knowledgeable fixed-income investor.
July 22, 2020
Why I Like Ginnie Mae Funds Now
Investing for Income

Why I Like Ginnie Mae Funds Now

A portfolio of mortgages should retain their value better than ordinary bonds if interest rates rise.
February 28, 2021
T. Rowe Price Financial Services Banks on a Turnaround
Stock Market Today

T. Rowe Price Financial Services Banks on a Turnaround

This fund is a good way to bet on an economic rebound.
February 24, 2021
DSTL: A Value Fund With a Twist
Becoming an Investor

DSTL: A Value Fund With a Twist

The fund’s 51.3% return since its inception in 2018 has more than tripled that of traditional value funds.
February 24, 2021