Stocks — Part XV: Target Retirement Funds, the simplest path to wealth of all

Ok, so you’ve read the Smoother Path to Wealth and thought,  “Aww man.  Three funds?  And I gotta rebalance them every year?  That’s too much to keep track of!”

Picard aww man

But then you hit the link and went to the Simple Path to Wealth.  As you read, you thought, “This is more like it.  Only one fund.  This I can handle.”  But then you got to the part where, maybe 40 years from now as you start looking at retirement, you’re going want to add a couple more.  “Aww man!”

jlcollinsnh hears your pain.  You need the simplest of all possible paths.  You need to be able to buy just one fund and own it till your dying day.  Any asset allocation crap should be handled for you.  You have bridges to build, nations to run, great art to create, diseases to cure, businesses to build, beaches to sit on.  Motorbikes to ride.  I’m here for you bunkie.

More importantly, so is Vanguard with a series of 11 Target Retirement Funds.* For that matter, so are other mutual fund companies, but as you know Vanguard is the primo choice around these parts so we’ll be talking about these. If your 401k or similar plan offers only one of the others, what is said here (excepting expense ratio costs) applies.

*(For some reason this link doesn’t stay set to just the Target Retirement Funds.  To bring them up when you get to the page, look at the left hand column.  Under Asset Class chose Balanced.  Under Fund Minimum be sure only $1000 is checked.  Under Management chose Index.  That should bring them up.  Then you can simply click on each to check out the specifics.)

If you click on the link you’ll see that these eleven funds range from Target Retirement 2010 to Target Fund 2060.  The idea is you simply pick the year you plan to retire and that’s your fund.  Other than adding as much as you can to it over the years and arranging for withdrawal payments when the time comes, there is nothing else you need ever do.  It’s a beautiful and elegant solution.

Let’s peek under the hood.

peek under the hood

Megan Fox wants to….

Each of these Target Retirement Funds (TRF) is what is known as a Fund of Funds.  That just means that the Fund holds several other funds, each with different investments.  In the case of Vanguard, the funds held are all low-cost Index Funds.  That’s a very good thing.  The TRFs ranging from 2020 to 2060 each hold only three funds:

  • Total Stock Market Index Fund
  • Total Bond Market Index Fund
  • Total International Stock Market Index Fund

To those three the TR 2015 fund adds:

  • Inflation-Protected Securities Fund

To those four the TR 2010 fund adds:

  • Prime Money Market Fund

As the years roll by and the retirement date chosen approaches the funds will automatically adjust the balance held, becoming steadily more conservative and safer over time.  You needn’t do a thing.

The expense ratios range from .17 to .19, depending on the fund.  Excellent.

What are the short comings?

Some people say the funds get too conservative too soon. Others complain that they are too aggressive for too long. For my money, I think Vanguard gets it pretty close to spot on.  Maybe a bit conservative for me personally, but then I’m on the aggressive side.  This is easy to adjust for.  If you want a more conservative (greater percentage of bonds) approach, choose a date before your actual retirement.  The earlier the date the more conservative the asset allocation.  If you want more aggressive (greater percentage of stocks), just pick a later date.

In deciding, be sure to remember what we learned looking at the Trinity Study in our discussion of withdrawal rates:  A strong dose of stocks is critical to a portfolio’s survival rate, especially once you begin drawing money out.

BTW, other fund companies use differing allocations for differing retirement dates. If those are what’s offered in your 401k or 403b plan, you’ll need to take a look and then decide. But the same principles apply.

So why doesn’t jlcollinsnh recommend them?

I do, actually, and am with this post.  They are an excellent choice for many, maybe most people.  They will certainly over time out perform the vast majority of active management investment strategies.

But I do have a slight preference for…

…the Smoother Path to Wealth and the Simple Path to Wealth.  Here’s why:

  • The expense ratios are even lower than those of the TRFs.
  • The TRFs all hold the Total International Stock Market Index Fund.  While this is an excellent fund, I don’t feel the need for additional international coverage beyond that found in the Total Stock Market Index Fund.
  • REITs are not part of the TRF mix. Held in VGSLX, these provide dividend income and, more importantly, serve as my inflation hedge.  Of course, you could easily just add VGSLX to your TRF of choice.
  • With separate funds, I can keep my bonds and REITS in my tax-advantaged accounts, protecting the dividends and interest from taxes.

Where are you likely to find Target retirement Funds?

looking under a rock

Painting by Ted Dawson

Target Retirement Funds have become very popular as options in the 401k and 403b retirement plans offered by employers. The thinking is (and it is sound) that most people really have very little interest in investing.  TRFs provide an effective, simple and well-balanced “one decision” solution.  Plus, because such retirement plans are tax sheltered, the interest from the bonds and the dividends from the stocks go untaxed.  Of course, when the funds are withdrawn in retirement taxes will be due.

What should you do?

If your 401k (or the like) offers TRFs or low-cost equivalents from another fund company, they are well worth your consideration.

If you want as simple as possible and still effective, TRFs are for you.

TRFs:  They come with the jlcollinsnh….

Seal-of-approval

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46 Comments

  1. lise
    Posted December 18, 2012 at 3:54 am | Permalink

    Thank you for these posts. I’ve got some way to go before retirement and a few obstacles, such as living in a country that would rather you didn’t save for retirement yourself: Norway. So my comment is a question, do you (or anyone reading) know how to invest in Vanguard from Norway (or indeed any European country)?

    • Posted December 18, 2012 at 8:26 am | Permalink

      Hi Lise….

      Vanguard does have a presence in various countries around the world, including several in Europe. You can check them out here:

      https://global.vanguard.com/portal/site/home

      Denmark and Sweden are both included, but unfortunately I don’t see Norway.

      I am a bit surprised Vanguard doesn’t cover the EU as a whole, but that also wouldn’t help you folks in Norway.

      The good news is Vanguard, with its client centered focus, is expanding rapidly. Hopefully Norway is next!

  2. Posted December 18, 2012 at 9:32 am | Permalink

    Thanks for explaining these funds. I also appreciated your arguments for the simple and smoother path to wealth, which I’m doing.

    I’m invested solely in VTSAX in taxable accounts. I do have a 6 month emergency fund in cash outside of that and I’m 28 years old. Why exactly should I buy bonds? I don’t honestly understand the reason for it, as it will increase taxable events for me and likely perform much, much lower than the stock market index. At my age, what makes sense to buy in addition to VTSAX?

    I like your recommendation of VGSLX and may considering buying some. What do you think about my buying those versus bonds? Also, what arguments are there for utilizing my employer’s simple IRA plan and a Roth IRA? I don’t have or contribute to either at the moment. My plan is to retire early (late 30′s/early 40′s) and I have a hard time accepting that I won’t be able to use the money until I’m 59 1/2.

    • Posted December 18, 2012 at 12:03 pm | Permalink

      Hi Kraig….

      Were I in your position and 28, VTSAX is the only fund I’d own, per The Simple Path. Provided you are mentally prepared for the wild ride.

      The only reason to own bonds, especially in this era of super low interest rates, is to smooth out the ride. It is more profitable over time to get mentally tough as per Part I in this series. Same applies to REITS, which I’d own before bonds at your age.

      If your employer offers a match, that makes their IRA plan a no brainer. Especially if your income is high enough to make the tax deduction worthwhile.

      Roth IRAs allow your money to grow tax free and, importantly, be withdrawn tax free when the time comes. That’s why I love them.

      If you plan to retire early, having all your money in IRAs doesn’t work. But then, your savings rate will/should be such that you’ll have plenty invested outside IRAs too. You don’t need access to it all at the same time. I’d do, and did, both.

      Plus, 59.5 will sneak up on you sooner than you know. Trust me on that. :)

      BTW, I’ll be linking to one of your posts in my next.

    • Posted December 18, 2012 at 6:20 pm | Permalink

      Kraig, you are able to withdraw Roth IRA contributions at any time, tax and penalty free, since the money you contribute to a Roth IRA has already been taxed.

      For example, if you contribute $5,000 to your Roth IRA today, you could take out $5,000 from that account next week without paying anything in taxes or fees. Say, however, that you decide to leave the money in there for a year and the $5,000 earns $100 in dividends, you’d still be able to take $5,000 out of your Roth IRA tax and penalty free but you’d have to pay a penalty if you decided to take out the additional $100 that was earned in the account.

      I am also planning on “retiring” in my 30′s but I still max out my Roth IRA every year because it provides a way to obtain additional tax-free growth. I simply maintain a spreadsheet that keeps track of how much I’ve contributed to the account so that I know how much I could withdraw before 59 1/2 (I hopefully won’t touch any of that money until standard retirement age but it’s nice to know that I can).

      So in your case, if you put $5,000 into your Roth IRA every year from now until you retire when you’re 38, you’ll have $50,000 worth of contributions in the account and $19,082 in earnings (assuming a 7% return). You could take that $50,000 out to use in early retirement and leave the $19,082 to grow tax free until you’re 59 1/2. Again assuming a 7% return, the $19,082 will have grown to over $79,000 by the time you eventually reach standard retirement age!

      • Posted December 18, 2012 at 11:43 pm | Permalink

        Mad Fientist and jlcollinsnh,

        Thanks for the great responses. jlcollinsnh, thanks for the recommendation to be 100% in VTSAX. That’s exactly what I was thinking and I love the idea of keeping in that simple.

        Mad Fientist, thanks for the advice on funding the tax advantage accounts due to the ability to pull out my contributions. I think I’m going to open and max out a Roth this year and likely contribute up to the limit on my employer Simple IRA plan.

        jlcollinsnh, I’m looking forward and honored that you will be referencing one of my posts in the near future.

        Kraig

      • Posted December 10, 2013 at 6:11 pm | Permalink

        The explanation by Mad Fientist is probably the most lucid, and frankly the best, reasoning for having a Roth IRA!

        One more factor, if you need more, to consider opening a Roth early is that they have limits to the contribution based on your AGI (Annual Gross Income), as mentioned by Michael above. After a certain point in their professional career, a lot of people will no longer be able to contribute to Roths.

  3. Posted December 18, 2012 at 10:01 am | Permalink

    Great explanation James. I recommend Target Date Funds to everyone that has them available in their 401(k) plan, or cousins 403(b), 457 and TSP. They are a great retirement savings vehicle for anyone that wants a hands-off approach, and like you mentioned, have very low expense ratios (typically).

  4. Posted December 18, 2012 at 3:51 pm | Permalink

    Here’s a better permalink for the Vanguard Target Retirement funds: https://personal.vanguard.com/us/funds/vanguard/TargetRetirementList

    Hope this helps!
    Joe

  5. Posted December 18, 2012 at 11:15 pm | Permalink

    Smart minds think alike. I started writing an article on Gone Fishin’ Portfolio several days ago. Since it’s entirely comprised on Vanguard funds, I decided to peek at your blog. And, here you are.. writing on the same topic, just notch better than me. John Bogle owes a big thank to my pal! Wait, we all owe a big thank to John. :)

  6. Gypsy Geek
    Posted December 19, 2012 at 2:11 pm | Permalink

    Hi. Are you sure that internal rebalancing in a target retirement fund is not a taxable event? It is my understanding that it is, just as an actively managed mutual fund’s buying and selling within the fund is.

    Also, withdrawing from a 401k/IRA before 59.5 penalty free is possible due to the IRS’s 72t exemption. It does require fancy actuarial tables, etc, but it is possible. And even without the exemption, If you are in a high tax bracket such that the penalty and the tax rate coming out is lower than your rate during your working years, it’s also a bargain.

    For example, say you are in the 33% bracket during your working years, but expect to be in the 15% bracket afterwards. Even if you pay the 10% penalty, 10 + 15 = 25% is less than 33%. However, it may not make sense for everyone…

    • Posted December 19, 2012 at 3:09 pm | Permalink

      Thanks GG…

      and congratulations!

      You’ve caught me out in one of my biggest fears: Making a technical, factual error in one of my posts.

      You are absolutely right and I stand, with my hat off to you, corrected. The re-balencing of the funds in a TRF is indeed a taxable event just like the buying and selling of stocks in any mutual fund is, as you point out. I’ve deleted my incorrect paragraph from the post.

      In the 1.5+ years of writing this blog if I’ve learned anything it is that there are some very smart, well informed folks out there reading it. It is been a matter of pride, and no small amount of fact checking, that my stuff stands up to their scrutiny. But not always.

      You are also correct in that there are strategies for penalty free 401k/IRA withdrawals. Since I discuss this elsewhere I’m less distressed at you pointing out this one. :) As you mentioned, such strategies can be complex and overall my belief is most often most people are better served letting them ride until 59.5+.

      While my pride is wounded, I am genuinely grateful to you. It is important that folks feel confident in the factual accuracy of what they read here. If that means my ego takes the occasional well deserved hit, it is a small price to pay.

      Hope you keep reading and chime in anytime!

      • Gypsy Geek
        Posted December 19, 2012 at 6:35 pm | Permalink

        Don’t feel bad about the tax implications of target retirement funds. I wasn’t going to point it out, but I figured that someone may make the mistake of investing in them thinking they’re a free tax-ride.

        I am an avid reader of your blog, even though I never comment. I must confess that I have read every post you have written at least twice, especially the stock series. It is very refreshing to hear your optimistic, yet balanced view on life and investing.

        My wife and are on a early retirement path (we’re in our mid 30s). By mid next year we should have enough f-you money to to quit our jobs entirely, forever, but we enjoy our work enough to want to continue working. It is a great milestone (for me anyhow, my wife is completely unimpressed because she absolutely loves her job). The plan is for her to take a few months off next year so we can travel, since I work from home. Being free is a good feeling, and is in large part due to the advice from both you and MMM.

        Many thanks!

        • Posted December 19, 2012 at 6:57 pm | Permalink

          No worries GG….

          …. and my thanks to you for calling attention to it is genuine. It really is important that what I post be accurate. I don’t have a proofreader or fact checker, so I’m surprised I’ve done as well as I have.

          I’m honored you are reading the blog and so closely. Especially as you being able to pick out that error indicates you know your stuff.

          Congratulations on your great progress toward FI. My wife still loves her job, too! But at least it gives her lots of time off for our own travels.

          Make your way to New Hampshire and coffee’s on me!

  7. Jim Partin
    Posted February 25, 2013 at 9:12 pm | Permalink

    What a coincidence! I was just reading the jlcollinsnh blog post about Vanguard TRFs and found it interesting as I have been considering rolling my AA terminated defined contribution retirement plan money into this fund. I like what I see with this fund as I really loathe the idea of paying 1-1.5 % of my assets to a financial planner to essentially do the same thing with asset rebalance as my risks tolerance decreases with age and nearer to retirement. Also, I have no aspirations of becoming a financial wizard myself, pilots have a way of ‘investing until it’s gone’ record when it comes to managing their money!

    • Posted February 26, 2013 at 12:30 am | Permalink

      Hi Jim….

      Glad this post helped a bit in your personal analysis!

      If you haven’t already, read this one too: http://jlcollinsnh.wordpress.com/2012/06/06/why-i-dont-like-investment-advisors/

      As a pilot, you belong to a group of highly paid professionals who spend a lot of time learn and staying current in their own areas of expertise. Doctors, lawyers, engineers and the like are the same. Perfect targets for “advisors.”

      Recently I came across an article about insurance agents, masquerading as investment advisors (nobody wants to talk to an insurance agent), trying to sell life insurance as an investment. A horrible idea for the investor but, as describled by their sales trainer, “an obsenely profitable niche” for them. Profits that come out of the investors pocket, of course.

      They call their investors ELFs: Easy, lucrative and fun.

  8. eric
    Posted March 11, 2013 at 11:51 am | Permalink

    A weekend of reading your site has made clear many facets of the mutual fund maze, and ironically, my employer uses Vanguard for our 401K, though VTSAX is not an option.

    Target Funds are an option, but wondering which (if any) of these other available funds/ideas look better to you – age 35:

    -Stick with 100% in the TRF 2040(VFORX)?
    or
    -50/50 split between VINIX and VEXMX?
    or
    some other combo of any of the following?

    VEXPX
    VEXMX
    VINIX
    VMRGX
    VPMCX
    VWNDX

    • jlcollinsnh
      Posted March 12, 2013 at 12:18 am | Permalink

      Hi Eric…

      Go to the Vanguard site and look up VTSAX. You ‘ll see that it also comes in “investor shares” and ETF versions. Maybe your employer’s plan offers one of those. Or they might offer VITPX which is the institutional version. This would be the most aggressive way to go.

      If you want to smooth out the ride with some bonds in the mix, the TRF is the best bet.

      • eric
        Posted March 12, 2013 at 6:50 am | Permalink

        Hello Jim and Thanks!

        As suggested I checked the site but its not offered.

        The only two indexes offered in the plan are:

        Vanguard Extended Mkt Index Inv (VEXMX)

        Vanguard Institutional Index Fund Institutional Shares (VINIX)

        Any opinion on these?

        • jlcollinsnh
          Posted March 12, 2013 at 10:37 am | Permalink

          VINIX is the institutional version of the S&P 500 index fund. Super low expense ratio of .04%

          VEXMX is the Investor Shares version of the ‘extended market’ index fund. Expense ratio of .28% This one invests in small and mid-cap stocks not in the S&P 500.

          You could combine them to approximate a total stock market index, but it wouldn’t be just a 50/50 split. Plus you’d have to rebalance occasionally.

          Since the performance of the Total Stock and S&P 500 indexes are very close over time and the expense ratio is so low I’d choose VINIX, set my contributions to the max and forget about it for 20 years. :)

        • eric
          Posted March 12, 2013 at 10:52 am | Permalink

          Thanks Jim!

          As “proof” that I have learned something from reading your site, I kind of guessed that you were going to say VINIX:) Again, thanks.

          I’m a complete noob at this stuff…and never really gave much thought to why the expense ratio even mattered…but now I get it and boy its an eye-opener!! I’ve seen some (non-Vangaurd of course) with annual fees of 6.00+%!! Unreal.

          Excellent site you have here – highly recommended.

  9. Teresa
    Posted March 17, 2013 at 7:08 pm | Permalink

    Hello Jim,
    THANK YOU VERY MUCH FOR THIS EXCELLENT INFORMATION. It takes quite a while to absorb it all! I have another question similiar to last, what about VIFSX whichis offered within my 401K? Expense ration .05% From my research it appears to be the same as VINIX but traded on the foreign exchange? Very confusing.
    Thank you!

  10. guest052237
    Posted April 18, 2013 at 11:30 am | Permalink

    How about if the expense ratio for the TRF is at 1.28? The fund is T. Rowe Price Retirement 2050.

    Also, the only index option in my 401k is SSgA S&P 500 Index Fund – Class D. Is the class D specification something to worry about? Expense ratio of .28, thoughts on this? It looks like my best bet at this point.

    Thanks for your help!

    • jlcollinsnh
      Posted April 18, 2013 at 3:36 pm | Permalink

      1.28 is a huge expense ratio and I choke on the thought. So, while TRP has some fine funds, I’d avoid this one.

      I did a quick check on http://www.ssgafunds.com/product/fund.seam?ticker=SVSPX

      This is their Index 500 fund and that link shows an expense ratio of .18, less than the .28 you’ve indicated. It might be an extra charge for your 401k, which does seem odd. They should be getting a better deal for you, not less. This might be what’s behind the Class D spec.

      In any event, if these are your choices, I agree it is your best bet and not a bad one at that. If you want to smooth out the ride, you can look for a total bond market fund in your selections to add. Most plans offer one. But if you are young and (this is very important) tough enough to stay the course when the market crashes, all in with the Index 500 works.

      • guest052237
        Posted April 18, 2013 at 4:00 pm | Permalink

        man, thanks for the quick response, i appreciate it!

        the .28 expense ratio is something i can handle given my other options (lowest other than the bond index below).

        i decided to go with 90% in the S&P500, and 10% in the Columbia U.S. Treasury Index w/an expense ratio of .20%. i’m 26 so willing to be pretty aggressive.

        this should be good for my 401k, but will certainly be opening up an ira of some sort, along with a taxable account through vanguard…you’re spot on with those guys, they rock!

        thanks for the great advice, i’ll let you know when i wake up and realize i’m rich :)

        • jlcollinsnh
          Posted April 18, 2013 at 4:06 pm | Permalink

          My pleasure and glad I got to it before we left for Prague.

          Sounds like you’re on a great path. Hope you continue to comment around here on the way to getting rich, too.

          Oh, and when you are, I’ll expect you to buy the coffee….:)

  11. Mike
    Posted June 10, 2013 at 11:26 pm | Permalink

    Hi and thanks for sharing your experience. I am a graduating physician with loads of debt. I will begin making lots of cash in the next few months. Loans are at 6%, mortgage to be @ 3.2%. Income to be very solid. If you were me? What would you do at this juncture?
    1. Pay off ‘bad debt’ aka student loans fast
    2. Put a nice chunk of change into REIT ETFs
    3. Go real aggressive early, small amount in safer funds?
    4. Start acquiring real estate?

    A combination of the above I suppose?
    Many Thanks
    Mike

    • jlcollinsnh
      Posted June 10, 2013 at 11:49 pm | Permalink

      Hi Mike…

      Do me a favor? Repost this under the “Ask jlcollinsnh” tab above and tell me a bit more about yourself. Age for instance…

      Thanks!

  12. Sean
    Posted June 16, 2013 at 8:49 pm | Permalink

    Hello Sir,

    I am already setup on a TRF using my employers 401K and also using Roth IRA on Vanguard.

    I do have additional moneys saved and can I use this to setup a TRF on Vanguard (I am 35) without the IRA option? As in, can I purchase TRF as if I was purchasing some stocks and let my moneys sit in there and not have to wait until I am retirement age to withdraw from this?

    Please advise.

    • jlcollinsnh
      Posted June 16, 2013 at 11:36 pm | Permalink

      Hi Sean…

      Absolutely! You can open a non-IRA account with any Vanguard fund, including the TRFs. But might I make a suggestion?

      TRFs include bonds and bonds pay interest. Outside an IRA that interest is taxable. This is why TRFs are better held in IRAs, and 401Ks and the like.

      VTSAX is all stocks and is considered to be “tax-efficient”. This mostly means there is no bond interest and being an index fund very little trading to trigger taxable capital gains. This is what I’d use in your taxable account.

      Of course, this will tilt your allocation more heavily into bonds. At age 35 this wouldn’t bother me. But if it does you the simple solution is to go with a TRF that has an earlier date and therefore a greater percent in bonds.

      When thinking about your allocation you always want to consider all your investments as a whole.

      • Sean
        Posted June 17, 2013 at 11:17 am | Permalink

        Thanks for your recommendation. I will definitely look into this – I have about $75k – would you suggest I drop the entire amount into the VTSAX? Is it more of a long term thing where I pull out perhaps 10-20 yrs later? Thank you sir!!!

  13. Tom
    Posted July 13, 2013 at 10:09 pm | Permalink

    Jim – Thanks for the detailed series; I have certainly learned a lot! (fyi, I got here from MMM.)

    Right now, I have both my Roth and Traditional IRAs with Vanguard in their Target Retirement Funds for the “set it and forget it” reason you mention above; however, I’m considering moving everything into VTSAX for the slightly lower expense ratios, but mainly because of the dividend opportunities. The target date funds only distribute dividends once per year, while VTSAX distributes quarterly. Free money four times per year is better than one time, right?

    Assuming the above is logical, what are your thoughts on VHDYX (High Dividend Investor Shares)? I realize that it has a higher expense ratio than VTSAX, but the dividend yield is almost twice as much, which is pretty exciting, especially for tax advantaged accounts.

    Thanks again for your help.

    • jlcollinsnh
      Posted July 14, 2013 at 6:26 pm | Permalink

      Hi Tom…

      Seems you have a bit of a mis-understanding as to dividend payouts.

      If your fund is paying you a dividend of, say, $1000 a year, that is how much you’ll get regardless of how often they issue payouts. If they do it annually, you’ll get $1000. If quarterly, $250 each quarter.

      So that’s not a reason to switch to VTSAX. In fact, while I haven’t checked, I’d bet the TRF has the larger annual payout, if only because of the bonds it holds.

      But the slightly lower ER is.

      The other reason is VTSAX is only stocks, no bonds like your TRF. Over time (think decades) this will very likely give you a better return. But in exchange you’ll have to deal with a much rougher ride. Plus, when the time comes, you’ll need to create your own asset allocation. That’s something the TRF does for you automatically.

      Make sense?

      As for VHDYX, understand that with it you are buying only a very specific segment of the market: Dividend stocks. If that’s what you want, this is the best way to do it. But remember, you are giving up all the other segments that VTSAX reaches for you. For more on this: http://jlcollinsnh.com/2011/12/27/dividend-growth-investing/

      • Tom
        Posted July 15, 2013 at 1:24 pm | Permalink

        Thanks for the followup and the dividend article link.

        To clarify, wouldn’t $250 four times per year be better than $1,000 due to compound interest of the original principal plus the dividends?

        • jlcollinsnh
          Posted July 15, 2013 at 8:29 pm | Permalink

          somewhat. not enough that it would influence my investment choice.

  14. Johan
    Posted August 21, 2013 at 10:09 pm | Permalink

    Just a quick question.

    I wanted to start investing but only have $1000 to begin. Is it reasonable to start with a TRF and then switch to the VTSAX after accumulating $10,000?

    • jlcollinsnh
      Posted August 22, 2013 at 10:46 am | Permalink

      Perfectly. Just watch the transaction expenses.

  15. Mark Abner
    Posted September 17, 2013 at 12:45 pm | Permalink

    Jim, This summer I have been enjoying your site, MMM, Mad Fientist, Brave New Life, More than Money. Whew! I’ve learned a lot from you all and you are all inspiring. This is my first post on your site. For years my core non-taxable accounts holding has been VASGX (Vanguard Life Strategy Growth Fund), which is a fund-of-index-funds. Its composition is always pretty darn stable at:
    1 Vanguard Total Stock Market Index Fund Investor Shares 55.9%
    2 Vanguard Total International Stock Index Fund Investor Shares 23.8%
    3 Vanguard Total Bond Market II Index Fund Investor Shares 16.3%
    4 Vanguard Total International Bond Index Fund Investor Shares 4.0%
    Total — 100.0%

    So stocks are 79.7% and bonds 20.3% and expense ratio is .17. I have been surprised not to see any discussion of it on any of the blogs above and so I wonder if I’m missing something and VASGX is not optimized for some major reason? I do wish it offered Admiral shares but expense ratios have dropped over time. The risk profile is comfortable for me since I remember feeling very good for having VASGX’s international exposure a few years ago when the U.S. stock market was flat and for the bond exposure later when everything else tanked. I’ve read your whole great stock series so I know you aren’t much for holding international stocks but wonder if you have any thoughts or concerns about me having probably 80%+ of our non-taxable account stash in this all-in-one fund as I am considering making it 100%. Thanks!

    • jlcollinsnh
      Posted September 20, 2013 at 12:21 pm | Permalink

      Hi Mark and welcome.

      Thanks for the kind words and I’m humbled that you place me in with those other fine blogs. High praise, indeed.

      As for VASGX, it is a fine fund of its kind and it should serve you very well and with minimal hassle over the years. Just set it, forget it and add to it as you can. It will get you there in fine shape. It has plenty of diversification and I have no problem seeing you go to 100% in it.

      As you note, it is a bit more expensive than doing it on your own with pure index funds, but not so much as I’d worry about it. Small price to pay for the convience of not having to deal with periodic rebalancing.

      In fact, if I didn’t enjoy this stuff as I do, I’d likely use a TRF like that one myself.

      • Mark A.
        Posted September 23, 2013 at 9:50 pm | Permalink

        I appreciate you taking a look at it and commenting. I indeed neglected to mention one of the major draws for me – that Vangard handles all the rebalancing – so I’m glad you did.

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