Target Funds

[sue]

Such as VTTHX... yea or nay, and why?

[Bluerobin]

Sue, I have never been a fan either, for the same reason as DI. I think picking my own is more suitable to my investment strategy. If you are not into investments, then it might be a more comfortable way for you to invest. Track it at least monthly and get out fast if it does not do well.

[Deleted]

My wife has one of the vanguard target funds as her only investment in her ROTH. I don't use a target fund, but I am thinking of switching to one to keep things simple.

[sue]

Thanks for the feedback... unfortunately, no, I don't feel comfortable investing, I'll admit it, the whole thing intimidates me... it's what's stopped me from opening a Roth for years... target funds seem simple enough. I wasn't planning to monitor monthly, but quarterly... monthly sounds good, especially to start out with.

Which leads to another dumb question... when is it bad enough to get out and when do you grit your teeth and stick it out? I know there is no definitive "if a, then b", just wondering how y'all handle it personally? From what I've seen (but without knowing a whole heck of a lot about the subject), VTTHX appears pretty spread out... my target date is 2035 (okay, I think I just shed a little tear on that one lol)... so I have time to ride out the storms... but when do you cut your losses and run?

[Deleted]

Personally, I am a long term buy and holder. I beleive that the US stock market will go up in the long term. I believe that DCAing will somewhat protect me in a downturn.

Therefore, I would never cut and run. As you get closer to retirement, even though you will be in a target fund, you will want to pay closer attention to your asset allocation and make sure the money that you need to live off of is protected from the market.

[Bluerobin]

Sue getting in and out depends. If it is a fund directly with a broker, there will be a fee, which you may want to avoid and tough it out. Usually, the fees range 5,4,3,2,1 percent, depending on the number of years you have been in the fund. If it starts to do poorly, suspend your contributions and don't take the hit unless it really dives. If it is through a work plan, usually you can switch without penalty. Check the terms.
It may be time to learn about investing. Start reading and see how you catch on. I started with local utilities and had the dividends reinvested. They are relatively stable and pay healthy dividends.

[frep]

Overall I think Target Funds are fine.

In my opinion they're a good choice if a) You're just starting to invest in an IRA or b) you want to park your money somewhere for now until you are able to gain more knowledge.

If you're just starting an IRA a target fund will give you a chance to reasonably diversify in one fund. You can't diversify much otherwise with a 5,000 per year limit and most funds having a $3,000 minimum to buy them.

[sue]

Archie... don't cut and run... got it...

bluerobin... it is a roth through vanguard.com, not employer related... I opened it yesterday already actually, but am having a bit of buyers remorse? I did not set up any monthly contributions, only transferred $4k for now to get started in the hopes of overcoming my inertia. The plan is to build the $ back up in my EF (it's not at zero now, but a bit low... forced incentive for myself to increase savings), and then transfer another lump sum, most likely quarterly. It may not be a great plan, but it's better than what I have been doing.

[yclept]

Fees & Expenses
Expense VTTHX
Total Expense Ratio: 0.00%
Max 12b1 Fee: N/A N/A
Max Front End Sales Load: N/A
Max Deferred Sales Load: N/A
3 Yr Expense Projection*: 61
5 Yr Expense Projection*: 107
10 Yr Expense Projection*: 243
* Per $10,000 invested

Fees & Expenses
Expense Category Avg
Total Expense Ratio: 0.50%
Max 12b1 Fee: N/A N/A
Max Front End Sales Load: 5.19%
Max Deferred Sales Load: 1.76%
3 Yr Expense Projection*: 581
5 Yr Expense Projection*: 1,008
10 Yr Expense Projection*: 2,081
* Per $10,000 invested

Well, it's expenses seem pretty cheap. I don't much care for the performance, it's pretty much matched the DOW Ind.
So after any period of time, you might end up with more money than you contributed, or less, which is the fate of buy-and-hold practitioners. You will have something saved for retirement, which is certainly better than nothing. If you are still working age, you should definitely be saving for retirement in tax deferred or tax exempt programs. This investment vehicle doesn't seem any worse than others of its type, and if it's all you are willing to learn how to do, it's certainly better than not saving at all.

[sue]

"This investment vehicle doesn't seem any worse than others of its type, and if it's all you are willing to learn how to do, it's certainly better than not saving at all."

Ouch lol. It's not a matter of being unwilling to learn, more like not sure where to start? It seems the more I read or watch, the less I know. I don't have anyone who can teach me about this in real life, so I figured this board and starting with VTTHX is a good start. I have a defined benefit plan and supplemental retirement in a 457 through my employer as well, but feel I will need more than those.

I'm 37, so definitely of working age.

[rovo]

I just don't like target date funds. Period. Learn about investing and make regular contributions to your account.

[sue]

rovo... can you explain why you don't like them? Any specific advice on how to get started on learning about investing? I've watched and read some of the fluffier finance folks, like Dave Ramsey and Suze Orman. I've read books like Rich Dad, Poor Dad. There seems to be a lot of mutually exclusive advice out there.

[rovo]

It was mentioned by other posters that you can do the same thing yourself. Target funds just do it for you.

We had a list of books for beginners to read but I'm not sure where it went. I'm told by my son Investing For Dummies is a good starting point.

I don't think the average person realizes just how easy it is to make big bucks in the market. I gave up working when my market play was yielding 3X what I was earning in the day job. BTW, the day job was paying in 6 low figures.

[sue]

"It was mentioned by other posters that you can do the same thing yourself. Target funds just do it for you."
Maybe I'm missing the obvious, but I actually like that part.

"I don't think the average person realizes just how easy it is to make big bucks in the market."
Then I'm guessing it won't take long to explain to me what to do to easily make those big bucks?


"I gave up working when my market play was yielding 3X what I was earning in the day job. BTW, the day job was paying in 6 low figures."
Nice

[tyfighter3]

Sue, go to the Long Term Game and get into it. It would be good practice for you on buying stocks. You can see what the other players are doing and you could ask them why.

[sue]

Found it, will read up on it, thank you.

[rovo]

Then I'm guessing it won't take long to explain to me what to do to easily make those big bucks?

Sure. No problem. Start an account at a low cost brokerage house for the Roth. all extra income into the Roth and a taxable account. Learn as much as you can about basic investing and how to value a company. Do not allow your investing to be governed by emotions (very hard to do by the way). With the advent of the Internet it is very easy to have access to people able to answer questions for you. I've been playing the market for about 30 years and I'm still asking questions on a daily basis.

[sue]

Thanks, rovo.

[yclept]

I'm sorry if my reply seemed gruff, but you can learn to make much better investment decisions for yourself than will be attainable using mutual funds. It is true that you need a relatively safe place to put your money while learning, and this mutual fund is probably as good as any. Personally I'd be more inclined to just use an indexed ETF like QQQQ, or SPY.
The fact of the matter is that the great majority of fund managers are much more interested in their own year-end bonus than they are your investment results. They are often referred to as "smart money" -- I believe the opposite to be true -- if they can do well by you, they will, if they can't, well the year-end bonus will be there for them regardless! In the end, it's all about risk versus reward. Those who can attain high reward for the amount of risk taken extract money from those who take high risk for low reward. No fund manager cares about your money as much as you do.
No single system or method is consistently successful, and, recognizing that, most people on this board are reluctant to recommend whatever they use without qualification. I personally believe one has to be comfortable with multiple strategies and switch from one to another as market conditions change, which, of course, implies that one has to have indicators to asses market conditions.
I posit that fundamental analysis is the basis of all investment evaluations. One has to learn to evaluate whether a stock is overvalued or undervalued, which is not just a function of being a successful or failing business. AAPL, for example, is a successful business, but, in my opinion is extremely overvalued.
Wikipedia has a good article on fundamental analysis: en.wikipedia.org/wiki/Fundamental_analysis. It's as good a place to start as any. Read widely and remain dubious of everything you read.
www.knispo-guide-to-stock-trading.com/fundamental-analysis-book-summaries.html
stockcharts.com/school/doku.php?id=chart_school
www.dojispace.com/technical-analysis-books.aspx
This article at Motley Fool gives a balanced description (in my opinion) of beginners considerations: www.fool.com/investing/beginning/investing-strategies-your-first-stock.aspx

It takes a lot of work; one is constantly learning and exploring new methods while working with the best ones one has mastered to date. I think you have to like doing it to do it well.

[phil5185]

If I was young and still working, I would be in a Target. They closely mirror what I did manually (and very successfully) before they were invented. I don't buy into the "I can do better' attitude - almost no one beats the market over a 20 or 30 yr period, including the professional fund managers. A few have bursts of brilliance, maybe even for a decade, but their end-game crashes are notorious.
In one 23 yr test where the general market index posted >12%/yr, the clients who sold during downturns and bought back a year two later had an average return of 2.8%/yr. They were absolutely out of phase with their buy/sell analyzes. Think about the phrase "I'm waiting for the market to recover so that I can get back in" - does that make sense to anyone?
You buy TO hold, invest steadily & incrementally. (the Targets lean toward conservative, you can compensate by using 2040 or 2050)

[sue]

"I'm sorry if my reply seemed gruff"
A bit gruff, but honest, and I appreciate honesty... no apology needed, but thanks for offering one.

"It takes a lot of work; one is constantly learning and exploring new methods while working with the best ones one has mastered to date. I think you have to like doing it to do it well."
My turn to be honest... I don't have the time right now. But thanks for the links, will definitely check them out.

[sue]

"If I was young and still working, I would be in a Target. They closely mirror what I did manually (and very successfully) before they were invented."
Thanks for the input, Phil... are you the Phil from the MSN boards? I used to lurk there quite a bit and found many of your posts interesting... and not just because you're telling me what I really, really, really wanted to hear here lol.

My final plan, based on everyone's input... I will keep the 2035 for now, contributing regularly and monitoring monthly while educating myself in the mean time. In case I don't feel comfortable where the 2035 is headed, I'll be able to make a more informed choice then, or I may take a smaller sum and test the waters a bit.

Thanks for everyone's feedback, I do appreciate it.