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The problem with these threads is we all have different opinions which make the posters more confused than ever. Those of us who've been investing for years and are really interested in it forget that most people aren't like us and never will be. Therefore, the simplest option is usually best, even if it's not what we would do.
The problem with these threads is we all have different opinions which make the posters more confused than ever. Those of us who've been investing for years and are really interested in it forget that most people aren't like us and never will be. Therefore, the simplest option is usually best, even if it's not what we would do.
I agree, in most cases, but this individual is young and may really be interested in learning about the market. How much simpler than investing in a highly-rated global equity fund? Just thinking about myself when I was his age. Knowing what I know now, after 30+ years of investing experience, know way would I invest in a target fund at his age. I would invest in a global equity fund, that invests primarily in small and mid-caps with a considerable dose of emerging markets.
People tend to ignore what an OP actually says. In this particular case the OP describes him/herself this way:
Quote:
I have a lot of anxiety in general, and choosing what funds to put money into is super stressful for me
Now why would anyone try to overwhelm a new(er) investor and make them even more confused and create more anxiety?
You have to take yourself out of the equation because the OP provided some good info that should be noted and considered. This person is looking for an easy, stress-free, less anxiety-inducing solution. It's important to take their emotions into context.
A target retirement fund may be something many experienced investors dislike for a variety of reasons, but it's not a *bad* choice, and especially not for someone who is new at this and self-describes as "anxious" and "overwhelmed." If an experienced investor's "perfect" choice among the options causes the new investor to feel vulnerable, unsure, and anxious, then that's not the right choice for them.
I agree, in most cases, but this individual is young and may really be interested in learning about the market. How much simpler than investing in a highly-rated global equity fund? Just thinking about myself when I was his age. Knowing what I know now, after 30+ years of investing experience, know way would I invest in a target fund at his age. I would invest in a global equity fund, that invests primarily in small and mid-caps with a considerable dose of emerging markets.
The thing is, no one knows their risk tolerance until after a major market downturn. Global funds tend to be more volatile than even a typical U.S. stock fund. And the Vanguard 2055 fund is essentially a global fund anyway. It's only 11% cash and bonds. Heck, some global stock funds hold almost that much in cash, anyway.
People tend to ignore what an OP actually says. In this particular case the OP describes him/herself this way:
Now why would anyone try to overwhelm a new(er) investor and make them even more confused and create more anxiety?
You have to take yourself out of the equation because the OP provided some good info that should be noted and considered. This person is looking for an easy, stress-free, less anxiety-inducing solution. It's important to take their emotions into context.
A target retirement fund may be something many experienced investors dislike for a variety of reasons, but it's not a *bad* choice, and especially not for someone who is new at this and self-describes as "anxious" and "overwhelmed." If an experienced investor's "perfect" choice among the options causes the new investor to feel vulnerable, unsure, and anxious, then that's not the right choice for them.
People tend to ignore what an OP actually says. In this particular case the OP describes him/herself this way:
Now why would anyone try to overwhelm a new(er) investor and make them even more confused and create more anxiety?
You have to take yourself out of the equation because the OP provided some good info that should be noted and considered. This person is looking for an easy, stress-free, less anxiety-inducing solution. It's important to take their emotions into context.
A target retirement fund may be something many experienced investors dislike for a variety of reasons, but it's not a *bad* choice, and especially not for someone who is new at this and self-describes as "anxious" and "overwhelmed." If an experienced investor's "perfect" choice among the options causes the new investor to feel vulnerable, unsure, and anxious, then that's not the right choice for them.
Good point. It's possible his/her stress comes from lack of knowledge. The more knowledgeable he/she becomes, it's possible some of this stress may dissipate. BTW, if he decides to stay with Vanguard, they have the Global Minimum Volatility fund.
Good point. It's possible his/her stress comes from lack of knowledge. The more knowledgeable he/she becomes, it's possible some of this stress may dissipate. BTW, if he decides to stay with Vanguard, they have the Global Minimum Volatility fund.
I have learned that when it comes to analyzing mutual funds, most people aren't like me. I'm the oddball. I LIKE looking at different mutual funds, their returns, what they're invested in, their investment philosophy, etc. Most people--even really smart people--don't and never will. This is hard for me to accept or understand, but it is nevertheless true. So the more options you present to people the more confused/overwhelmed/anxious they get.
At risk of further overwhelming our OP, Vanguard Global Minimum Volatility may be a good way to go. It hasn't been around very long, so I can't really recommend it.
But the main thing really is to just invest money. The people who regularly save and invest, even if they don't do it all that well, have 80% of it right, assuming they're not doing anything wildly risky (and I think we can all agree our OP is not) like investing in individual stocks.
But the main thing really is to just invest money. The people who regularly save and invest, even if they don't do it all that well, have 80% of it right,
Bingo! Just getting money into the market consistently, into well-allocated and diversified funds...even just 1 fund, is better than a person feeling uncertain to the point of paralysis and staying on the sidelines. That is really the core message that every new investor needs to hear. There's always time to learn about investing if there is a desire to do so, but it does not have to be learned right this minute, and if someone is not interested in learning about investing, that too is okay.
the target funds are okay because they are easy but i am not a fan of them .
the lack of standards as far as what constitutes the right mix at any given age or retirement date makes it a crap shoot as to what you really are buying in to without doing your homework .
target date funds load you up on investments based on time instead of what is happening around you and what part of the cycle an asset is in with no regard for your own risk tolerance.
not only do they not take risk tolerance in to the equation there is no standard format for what a fund should hold. it vary s from fund family to fund family.
back in 2008 the same 2010 target date fund from wells fargo in 2008-2009 lost 11.5% while the t.rowe price 2010 target fund lost 26.5%. that is a target fund that had 2 years to go before retirement. in fact the t.rowe target date fund didn't fall to below 45% equities until 5 years after the target date.
the glide path they follow is really not the right path for dollar cost averaging either ,.
with markets rising over time you are buying less and less shares over time at the same time the glide path is reducing equity exposure . that can end up making the target fund far more conservative than planned on if you did your homework . that can lead to reduced balances compared to had you simply used a balanced fund instead to dollar cost average in .
so it really is a half hearted solution at best , but it is easy to at least get in even if not optimal .
of course the problem is staying the course. in 2008 we had most of the youngin's in the 401k at our company bail ,run and never come back in because they were given very high equity positions in target funds day 1 .
another issue is that many who have target funds go and buy all kinds of other funds too undoing the very glide path the target funds are trying to follow . investors just end up with a non functioning hodge podge of stuff that works against what the other pieces are trying to do .
Last edited by mathjak107; 04-09-2018 at 04:09 AM..
With the OP's other U.S. investments though, I don't really feel that 35% in one fund is enough. The U.S. represents roughly half the global market. That other half should be represented to a greater degree in my opinion.
But OP, just the fact that you are putting money into your 401K and really looking at it is a good thing. Don't get fancy.
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