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with 5 years out all target funds were pretty aggressively invested. some a tad more ,some a tad less but basically more then i would be 5 years out.
before the drop there was lots of cometition for that money between the fund families so no one wanted to not be as fully invested as possible . dont forget before the drop most folks looked at returns and not risk when they decided what fund family to put their money in.
also they are not the best for putting money in over long periods of time such as dollar cost averaging in.
since they cut the equities allocation as time goes on and typically markets and hense share prices rise over time then the money you put in each month buys less and less shares at exactly the same time they are cutting equity holdings leaving the longer term target funds far to conservative then you may want.
My wife's work shifted her 403B from Lincoln National to Fidelity beginning 1/1/08. We tried putting her contribution into the Fidelity 2015 Fund, thinking it would be both diversified and age-adjusted for retirement. The fund did lousy, so we have since changed her contribution to:
50% Fidelity Balanced fund
25% Retirement Money Market
25% US Bond Index
This has done much better. Most of our other retirement was left in TIAA-CREF from former teaching positions. We are probably about 60% CREF Stock Fund and 40% TIAA Fixed Income. The primary advantage to TIAA is that the expense costs are less than other mutual funds, i.e. Lincoln National or Fidelity.
i myself prefer fidelity investment grade bond fund to us bond index.
us bond index mimics barclays aggregate bond index and as such is really unmanaged. i much prefer fidelity total bond fund or investment grade bond fund. both are managed bond funds. total bond holds some lower investment grade bonds.
so far ytd us bond index returned 1.49% while the managed funds total bond returned 2.65 and investmentgrade bond 2.57
Last edited by mathjak107; 04-11-2010 at 04:37 PM..
with 5 years out all target funds were pretty aggressively invested. some a tad more ,some a tad less but basically more then i would be 5 years out.
before the drop there was lots of cometition for that money between the fund families so no one wanted to not be as fully invested as possible . dont forget before the drop most folks looked at returns and not risk when they decided what fund family to put their money in.
also they are not the best for putting money in over long periods of time such as dollar cost averaging in.
since they cut the equities allocation as time goes on and typically markets and hense share prices rise over time then the money you put in each month buys less and less shares at exactly the same time they are cutting equity holdings leaving the longer term target funds far to conservative then you may want.
they work better lump sum investing
Some might say that at best they can function as a mid term bucket.
i myself prefer fidelity investment grade bond fund to us bond index.
us bond index mimics barclays aggregate bond index and as such is really unmanaged. i much prefer fidelity total bond fund or investment grade bond fund. both are managed bond funds. total bond holds some lower investment grade bonds.
so far ytd us bond index returned 1.49% while the managed funds total bond returned 2.65 and investmentgrade bond 2.57
I am in total bond and have decreased my position in that and my balanced fund in favor of more aggressive funds. Bill Gross of Pimco amongst others are concerned that domestic bonds are over bought and in fact are recommending more equities and foreign bonds. Some on CNBC are talking about a bond bubble.
also as sectors rise ,as an example oil .they dominate more and more of an indexes numbers and its not like a manager can say well oil stocks soared so lets cut back a little . nope the indexes have to take the full brunt of the sectors collapsing when they cycle.
theres another issue to with managed vs index funds. its always brought up how 75% of money managers dont beat the indexes long term..
while it may be true you have to look at those numbers.
as an example if you go to some of the really bad areas in nyc there is a pretty good chance you may be a crime victim... but if you never go to those areas there is a pretty good chance you will never be a crime victim.
there are loads of funds out there, many have histories of poor performance, hi fees, high trading turnover and expenses, narrowly focused and not really diversified,janus twenty being an example.
once all that stuff is weeded out i bet there is a pretty good chance an active fund will beat its index long term.especially if that time frame includes steep drops that were softened by the active managment...
i know my active funds blew away my total market etf the last few years.
Researching fund performance against within categories up to 10 years back as you know is fairly easy.
I am in total bond and have decreased my position in that and my balanced fund in favor of more aggressive funds. Bill Gross of Pimco amongst others are concerned that domestic bonds are over bought and in fact are recommending more equities and foreign bonds. Some on CNBC are talking about a bond bubble.
once cnbc starts talking about it, buy bonds.... the talking heads are usually wrong.
at least for the near term deflation is more a risk then inflation..there dosnt seem to be much indicating that inflation pressures are on the horizon yet... about the only thing is the wild spending but heck we have been doing that since world war ii...
im not to keene on treasuries but i think any increase in rates in intermediate term corporate bond funds would mean things are getting better in the economy and with that go credit ratings being raised so that may offset any rate rises.
thats why my newsletter is still hot and heavy in corporate bond funds. i think the average maturity on total bond and investment grade bond is between 4-5 years which still dosnt take on much interest rate risk
once cnbc starts talking about it, buy bonds.... the talking heads are usually wrong.
at least for the near term deflation is more a risk then inflation..there dosnt seem to be much indicating that inflation pressures are on the horizon yet... about the only thing is the wild spending but heck we have been doing that since world war ii...
im not to keene on treasuries but i think any increase in rates in intermediate term corporate bond funds would mean things are getting better in the economy and with that go credit ratings being raised so that may offset any rate rises.
thats why my newsletter is still hot and heavy in corporate bond funds. i think the average maturity on total bond and investment grade bond is between 4-5 years which still dosnt take on much interest rate risk
Why are bond funds growing if their performance is lousy? - Apr. 12, 2010
Given the secular trend, it's easy to see why money management firms would invest in bond offerings--but it's less apparent that it's a good move for investors. In fact, market strategists have turned bearish on bonds in recent months due to concerns that the Fed will hike interest rates. When rates go up, lower yielding bonds look less attractive, bringing down their prices and cutting into fund returns.
The above is a perspective from today. Good article about the popularity of bond funds.
I am in total bond and have decreased my position in that and my balanced fund in favor of more aggressive funds. Bill Gross of Pimco amongst others are concerned that domestic bonds are over bought and in fact are recommending more equities and foreign bonds. Some on CNBC are talking about a bond bubble.
I thought the conventional wisdom is that you had to have SOME bonds in your portfolio to balance the risk of stocks. If you are 8 years out from retirement, and 95% of your 403b is in either mutual funds or CD/money market, do you stop buying bonds for fear of a "bubble" ?
I thought the conventional wisdom is that you had to have SOME bonds in your portfolio to balance the risk of stocks. If you are 8 years out from retirement, and 95% of your 403b is in either mutual funds or CD/money market, do you stop buying bonds for fear of a "bubble" ?
Definitely want some bonds in your portfolio. I have gone from 30% to 20%. However while we are in retirement we are at a point of not needing to access our portfolio so our time horizon is now at the 70 year old market for our tax sheltered funds.
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