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Originally Posted by snowmountains
Do those target year funds really accomplish their goals? Opinions? Why/why not do you own them? (I don't)
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Your first question is too vague. What goals did you have in mind?
In general, some are good and some are lousy, just like anything else. Vanguard, T. Rowe Price, and Fidelity are said to have good ones. Vanguard's have the lowest expense ratios.
Since most people are horrible investors, these funds make a lot of sense. They are "set it and forget it" funds. You buy the fund, keep adding money, and it does the asset allocation for you and adjusts it over time.
Personally, I don't like the idea of my asset allocation getting more conservative with time. I plan on getting conservative right before retirement and then getting more aggressive again after the first 10 years of retirement. Target date funds get more conservative and stay that way, so they don't fit what I want to do with my portfolio. But most people are clueless about investing and find it boring. So they are a good vehicle for most people who don't care to learn about investing (although you should still know the very basics).
I also still like balanced funds, which have a mix of stocks, bonds, & cash based on the opportunities those asset classes provide at a given time. They generally keep the stock/bond mix in a certain range. Some have wider ranges than others. I prefer balanced funds over target date funds as I prefer shopping for assets based on opportunities instead of doing it based on age. The bonds and cash portion of most balanced funds
is high enough to cushion the blow in stock market downturns.
So overall, while not an ideal choice, I think target date funds are still a decent choice if their expense ratios are low and/or they are from Vanguard, Fidelity, or T. Rowe Price.
My favorite balanced funds that are open to new investors:
--Mairs & Power Balanced (Very consistent performance. Small asset base makes it flexible)
--Vanguard Wellington (Consistent and almost as cheap as an index fund)
--Oakmark Equity & Income (holds up well in down markets)
--Dodge & Cox Balanced (2nd cheapest fund family after Vanguard)
--Vanguard STAR (not my favorite, but has a low minimum balance requirement of $1000)
--Fidelity Balanced (Aggressive for the category, but solid returns and cheap)
--Fidelity Puritan (Same as Fidelity Balanced)
--T. Rowe Price Balanced (Also growth oriented like the Fidelity funds, but not as aggressive. But pretty cheap. Not top notch, but a solid option)
--Vanguard Balanced Index (The classic 60% stock/40% bond allocation in one index fund. And of course, it's cheap)
If you can get these in your 401k without having to pay the sales load, they are also worth a look:
American Funds Income Fund of America (R4, R5, R6, or A share classes only): Pairs boring, dividend paying stocks with a fairly large helping of lower quality investment grade bonds as well as junk bonds. It's usually a pairing that works well. Can also own up to 25% in international stocks. Consistently good long term performance.
American Funds American Balanced (R5, R5, R6, or A share classes only): Comes close to the classic balanced fund model. Owns 50% to 70% in stocks and the rest in high quality bonds and cash. Consistently good long term performance--almost exactly the same as Income Fund of America's over long periods of time (10+ years or longer).