That's similar to the strat I use. 401k: Target Date ROTH IRA: Personally managed I like the Target Date's diversification and risk mitigation rolled into a simple hands-off approach. That then frees my focus to manage moderate risk : high return assets in my other portfolio. It's a nice balance.
These comments are so helpful, thanks! I’m about to open a Roth IRA and I am considering doing a TDF. And then later down the line, I’ll have other investment accounts such as a 401(k) and will do a 3 fund portfolio. Sounds like it might be the best of both worlds to have a set it and forget it account but also get to dabble in improving your knowledge and learning how to rebalance your 3 fund portfolio in a separate investing account. Thanks all.
Appreciate your videos bud. Honestly probably one of the clearest videos I've seen on investments. I didn't realize retirement funds had such low expenses. I definitely will be just doing that. I've been using Vanguard's Robo Advisor and honestly the fee seems like a complete waste of money, especially considering target dates auto re-balance. I'm assuming your channel will blow up though. A lot of the investment channels I've followed either are bad at presenting or are presenting too high level for me to understand, which like you've mentioned: investing should be fairly simple.
If folks are considering target date funds, be aware that many brokerages offer them in both actively managed and indexed varieties. The active ones will have higher expense ratios. So consider carefully. Then again, either is probably better than not investing at all!
This is one of the reasons I hate that HR / payroll is deciding the 401K provider. They don't even understand net expense ratios so you get .5 -> 1% expense ratios on under-performing funds that are too conservative for people almost 40 years from retirement. Some of the 2070 target funds in my 401K are getting like 7% annualized returns after the expense fees. That's literally like a 4% net a year after inflation.
Great video. Watched it more than once over the past year. We had analysis paralysis and ended up doing target date fund 5 years ago. I think we know enough to transition to the more “manual” three fund. Do you have any videos or resources on how to transition? And and videos on how to rebalance which is the biggest hurdle for us?
Tae, is there historical data for Target Funds? - IE, if you put in $100,000 into a 2024 Target Fund in 1984 (40 years ago @ age 25) how would your target fund have done over the 40 years vs if you would have put that $100,000 into an S&P500 index fund and left it as well ? Thanks, good videos sir
Recent follow of this content and I’m really appreciating the simple honest analysis. An important note though is you want to avoid target date funds in taxable accounts. They are tax inefficient outside of tax advantaged accounts. This even bit vanguard customers badly recently.
Loved the information on this video, it was very helpful! You mentioned how you started off in a target fund and once you learned more, you changed this and moved into diversifying your own portfolio. Do you have a video that explains this more? I currently am signing up for my own target fun with my Roth IRA, but would also like to eventually handle it on my own once I'm more versed in the process. Thank you!
Just found your videos and your explanation are the best i just hit the SUB! Do you have a video of the must have 3 or 5 mutual funds for beginners in Fidelity i want longterm thankyou for your help
Can you do a video on using Target retirement funds and then using stock index funds in your taxable and still able to do tax loss harvesting etc. Target retirement balances itself, taxable account can be balanced using stock and small bond funds which doesn't give out much of ordinary capital gain.
What if you were to take a 3 fund portfolio and follow the percentage allocations of a target date fund? If you manually reallocate the glide path most TD funds have, wouldn’t you make out better overall? Thanks for the vid btw!
Great video! While using the DIY 3-Fund method am I able to sell my shares freely without worrying about accidentally selling or trading too early? Or somehow coming across short-term capital gains? I currently am using the DIY 3-Fund method but I am considering going to a Target Date Fund, if I sold all my shares and contributed instead to a TDF, could I be penalized? Thank you so much in advance!
The problem I have with target funds, is that you should have at minimum both an Roth IRA and a 401(k). The 401K should be less risky assets as it will actually be taxed, a Roth IRA should be basically 100% equities, assuming you actually have a decent amount of money in both investment positions. I literally look at a 401(K) as a means to retire while not using social security while you do Roth conversions within a lower tax bracket. Once your 401(K) is depleted and your Roth is fully funded with all remaining assets, then you'd take social security. I'm also going to have a brokerage account, so after I start taking social security I'll have any of my low-risk investments like bonds in the brokerage account and I'll take gains while in the 0% tax bracket (excluding state income tax).
Would it make sense to employ a target fund ladder strategy? At 51, i am concerned there might be too much bond weighting, but this might make sense given what seems to be the end of the rate hike cycle being near.
All of this is basically true, but you may not have a choice. I can't invest in individual Vanguard funds in my 401k but can invest in vanguard target funds.
Same, you only have a few choices on the 401k I got 40 percent going to target date, 20 percent to fskax, 20 percent to fspsx, and 20 percent to juemx.
DIY 3-fund is this for retirement, or just extra investing? the target date is for retirement, what if you want a way to invest long term but not all the way to retirement? more like 10 years?
3 fund is a great choice for a 10 year investment term. You might want more bonds to help volatility since you won’t have time to ride out a bad decade.
My target date fund at fidelity has an expense ratio is 0.75 %for my 403b and I want to do a 3-fund portfolio with vanguard funds due to the lower feesand manage it myself, but I'm a little apprehensive
You can just click through the holdings of your desired target fund, and then recreate the asset allocation using vanguard funds. It won’t be exact but it’ll be close enough.
There is an error in this video. The $22,160 difference assumes 25 years, not 20 years. Also earning 8% on $1,000,000 would not get you to ~$7 million in 20 years. This would take 25 years.
I could build a DYI fun in my 401k for cheaper than a target date, but the DIY lacks the added diversification of exposure to int bonds. I’d pay the slightly higher fee for that diversification. I’m not sure if that was mentioned in the video
And that very fund is the reason I ditched my three fund portfolio I held in my 401k for a number of years. I have converted the three fund to a simple two fund consisting of the S&P 500 index and a quality Vanguard Intermediate term Bond Index. No more international for me and since I am deep in retirement and in my 70's I doubt seriously I will ever regret the decision to jettison VTIAX.
@@qbnetrix1847 Well, Buffet has the resources to play around in the S&P500 with 90% of his money. Most retirees would never sleep with that much at stake. 50% is as far I dare tread.
If you were making this comment in the 2000’s you’d be explaining how VTIAX beat the S&P500. I’m not a huge fan of international but it’s kind of silly to only look at the last 10 year unless you know what the next 10 years will hold
Hi. Great video! I definitely suffer from analysis paralysis and every time I watch another video, I get more unsure on what I should do. I am a recently graduated medical student about to start residency. A few months into residency, I will be opening a Roth IRA through Vanguard. I really like the appeal of a TDF and not having to rebalance, truly setting it, adding money each month, and otherwise forgetting about it. However, I also want to become more knowledgeable and learn how to rebalance my portfolio. Do you think it would be reasonable to do a TDF in my Roth IRA, just to get started and then down the line, when I have other investing accounts such as a 401(k), I could do a 3 fund portfolio in that? Or does it make more sense to do TDFs/3 fund portfolios across all accounts or is a mix and match okay? I look forward to your response. Thanks!
For a target date fund , which is a FOF ( fund of funds), in addition to the 0.08% fee, do we have to pay the additional fund fees for the three underlying funds too ? Any idea ?
Go to vanguard, set up an account (very simple) and open up at target retirement fund. I'd recommend Roth IRA personally so you pay no tax on your gains.
