Splitting out a target date index fund

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Stargazer65
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Splitting out a target date index fund

Post by Stargazer65 »

Has anyone ever started in a target date index fund and then later decided to split out of it into regular index funds to save on fees? The difference seems insignificant when the balance is low, but when the balance is larger it seems like a lot more.

Edit: OTOH, if you think that's a bad idea and wouldn't do it, why? Did anyone do the reverse and go from 3 funds into a target date index fund?
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Re: Splitting out a target date index fund

Post by David Jay »

Assuming a low-cost TargetDate fund such as Vanguard TargetRetirement, it is highly unlikely that you can recoup the fee difference because you will not be dynamically rebalancing with daily fund in-flows and out-flows, as a TargetDate fund can do.

It may be a useful learning experience if you want to get more “hands-on” with your portfolio. I would have no strong opinion either way.

I am at the life-stage where I am simplifying my portfolio so I have recently converted all holdings to a single LifeStrategy fund - like a TargetDate fund except without the glideslope (it holds a fixed AA “forever”).
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Re: Splitting out a target date index fund

Post by orklc »

A better reason for splitting out a target date fund is when you have multiple types of asset locations (taxable, tax-deferred, tax-free) and it makes sense to put the different components in different locations. For example, stocks in tax-free (roths IRA or roth 401k or HSA), bonds in tax-deferred (IRA or 401k). Rebalancing with such setups is easiest if either tax-deferred or tax-free contains some of each class, since there are no tax implications to sales for rebalancing.
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Re: Splitting out a target date index fund

Post by vineviz »

Stargazer65 wrote: Fri May 14, 2021 8:01 am Has anyone ever started in a target date index fund and then later decided to split out of it into regular index funds to save on fees? The difference seems insignificant when the balance is low, but when the balance is larger it seems like a lot more.

Edit: OTOH, if you think that's a bad idea and wouldn't do it, why? Did anyone do the reverse and go from 3 funds into a target date index fund?
Unless the fees are criminally high relative to the alternative, I strongly recommend sticking with the target date fund.

The vast majority of investors end up worse off taking a DIY approach. This is because an extra 5 or 10bps in fees is tiny compared to the huge errors people often make like failing to rebalance, setting inappropriate asset allocations, changing funds based on past performance., etc. No one THINKS they will do these things but most people end up DOING these things, so keeping it simple and remaining in the TDF is usually the best course of action.
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Stargazer65
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Re: Splitting out a target date index fund

Post by Stargazer65 »

David Jay wrote: Fri May 14, 2021 8:45 am Assuming a low-cost TargetDate fund such as Vanguard TargetRetirement, it is highly unlikely that you can recoup the fee difference because you will not be dynamically rebalancing with daily fund in-flows and out-flows, as a TargetDate fund can do.
So you're saying that an inherent efficiency in the way the target date fund works, makes the fee difference pretty much irrelevant?
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Re: Splitting out a target date index fund

Post by bgf »

i did the reverse. went from multiple funds to using Vanguard Target Retirement funds where available and a TIAA Target Retirement in my wife's 403b. it was an excellent decision; i wish i'd made it sooner; and i recommend to everyone to seriously consider target date funds.

they are slightly more expensive than holding funds individually, but that expense doesn't come without value. the fund also generates an automatic glidepath for you and it rebalances constantly. many investors found in march of last year that they were unable to rebalance as directed by their plan. they were too scared to. i didn't have that problem as my fund rebalanced automatically for me. this is a substantial benefit that far exceeds the small basis point increase in ER.
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Re: Splitting out a target date index fund

Post by retired@50 »

Stargazer65 wrote: Fri May 14, 2021 9:10 am
David Jay wrote: Fri May 14, 2021 8:45 am Assuming a low-cost TargetDate fund such as Vanguard TargetRetirement, it is highly unlikely that you can recoup the fee difference because you will not be dynamically rebalancing with daily fund in-flows and out-flows, as a TargetDate fund can do.
So you're saying that an inherent efficiency in the way the target date fund works, makes the fee difference pretty much irrelevant?
Yep.

The difference in expense ratio is the obvious visible difference.

The less obvious difference is the potential (perhaps likely) mistakes you'll make over the next 40 years when manually re-balancing a three fund portfolio due to emotional concerns, timing errors, benign neglect, or whatever else.

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Re: Splitting out a target date index fund

Post by willthrill81 »

Stargazer65 wrote: Fri May 14, 2021 9:10 am
David Jay wrote: Fri May 14, 2021 8:45 am Assuming a low-cost TargetDate fund such as Vanguard TargetRetirement, it is highly unlikely that you can recoup the fee difference because you will not be dynamically rebalancing with daily fund in-flows and out-flows, as a TargetDate fund can do.
So you're saying that an inherent efficiency in the way the target date fund works, makes the fee difference pretty much irrelevant?
As vineviz pointed out, a small (5 to 10 basis point) difference is not enough to justify the behavioral advantages of a target date fund. So the answer to your question is yes.
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Stargazer65
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Re: Splitting out a target date index fund

Post by Stargazer65 »

This makes me want to consolidate into a target date index fund. I consolidated 4 years ago from 8 actively managed funds to 3 index funds. But I keep wanting to look at my balances and fidget with my AA way more often than is warranted. I know it's too often, because if I had to explain why I was fidgeting with it, my answer would be "I don't know...because?"

Maybe I should think about taking away that temptation since I seem to lack discipline in that area.
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Re: Splitting out a target date index fund

Post by ApeAttack »

Another reason to keep individual funds rather than a TDF is if you don't agree with the TDF's allocation for US and ex-US stocks. I'm currently around 75/25 US/ex-US because the arguments for market cap weight (around 45% ex-US) and 0% ex-US both make sense to me. So I split the difference. The TDFs available to me in my 403b and 457b plans have closer to market cap weight for ex-US stocks.

Additionally, you may feel ex-US bonds are not worth it, but the TDF available to you includes them.
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Re: Splitting out a target date index fund

Post by retired@50 »

Stargazer65 wrote: Fri May 14, 2021 11:03 am Maybe I should think about taking away that temptation since I seem to lack discipline in that area.
This is the sort of evolved thinking that many investors never come close to.

Setting things up in a way that prevents you from becoming your own worst enemy is smart.

Know thyself.

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Re: Splitting out a target date index fund

Post by CoAndy »

Stargazer65 wrote: Fri May 14, 2021 11:03 am This makes me want to consolidate into a target date index fund. I consolidated 4 years ago from 8 actively managed funds to 3 index funds. But I keep wanting to look at my balances and fidget with my AA way more often than is warranted. I know it's too often, because if I had to explain why I was fidgeting with it, my answer would be "I don't know...because?"

Maybe I should think about taking away that temptation since I seem to lack discipline in that area.
This was exactly me until I changed my entire 401(k) to Vanguard 2035 several years ago. Haven't tinkered since. I have no desire to tinker with it. I have tinkered with my 457, which is not in a target fund. Returns on the 401(k) have been better, not surprisingly. Seriously thinking about putting my 457 in a Target Fund as well.
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Re: Splitting out a target date index fund

Post by MishkaWorries »

CoAndy wrote: Fri May 14, 2021 11:47 am
Stargazer65 wrote: Fri May 14, 2021 11:03 am This makes me want to consolidate into a target date index fund. I consolidated 4 years ago from 8 actively managed funds to 3 index funds. But I keep wanting to look at my balances and fidget with my AA way more often than is warranted. I know it's too often, because if I had to explain why I was fidgeting with it, my answer would be "I don't know...because?"

Maybe I should think about taking away that temptation since I seem to lack discipline in that area.
This was exactly me until I changed my entire 401(k) to Vanguard 2035 several years ago. Haven't tinkered since. I have no desire to tinker with it. I have tinkered with my 457, which is not in a target fund. Returns on the 401(k) have been better, not surprisingly. Seriously thinking about putting my 457 in a Target Fund as well.
Me too. Earlier this week, I dumped $10,000 into my target date fund and $3,000 in the wife's Wellesley fund. Didn't blink an eye.

Today, we have $1,100 sitting in a taxable account and I just can't pull the trigger on buying VTI because the market is up and I'm guessing it will go down in the next few days. I also hate worrying about intraday swings.

I know it's stupid and pure emotion but it took my about 30 years of investing to realize I like one fund investing.
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Re: Splitting out a target date index fund

Post by Tattarrattat »

Benign neglect of rebalancing can actually help returns. Since the market goes up more than down, rebalancing every couple of years gets you a bit better return than constantly rebalancing, like a target fund does. You gain a little momentum effect, in essence your mean asset allocation ends up a bit higher. So the constantly rebalancing dynamic is not necessarily a win. That being said, totally agree that there are plethora of behavioral issues that can be remedied by an all-in-one, worth the small extra fees.
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Re: Splitting out a target date index fund

Post by wetgear »

Stargazer65 wrote: Fri May 14, 2021 8:01 am Has anyone ever started in a target date index fund and then later decided to split out of it into regular index funds to save on fees? The difference seems insignificant when the balance is low, but when the balance is larger it seems like a lot more.

Edit: OTOH, if you think that's a bad idea and wouldn't do it, why? Did anyone do the reverse and go from 3 funds into a target date index fund?
What's the ER of the target date fund?
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Re: Splitting out a target date index fund

Post by Stargazer65 »

wetgear wrote: Fri May 14, 2021 4:16 pm
Stargazer65 wrote: Fri May 14, 2021 8:01 am Has anyone ever started in a target date index fund and then later decided to split out of it into regular index funds to save on fees? The difference seems insignificant when the balance is low, but when the balance is larger it seems like a lot more.

Edit: OTOH, if you think that's a bad idea and wouldn't do it, why? Did anyone do the reverse and go from 3 funds into a target date index fund?
What's the ER of the target date fund?
0.12% was the one I would I would consider.
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Re: Splitting out a target date index fund

Post by bgf »

Tattarrattat wrote: Fri May 14, 2021 3:21 pm Benign neglect of rebalancing can actually help returns. Since the market goes up more than down, rebalancing every couple of years gets you a bit better return than constantly rebalancing, like a target fund does. You gain a little momentum effect, in essence your mean asset allocation ends up a bit higher. So the constantly rebalancing dynamic is not necessarily a win. That being said, totally agree that there are plethora of behavioral issues that can be remedied by an all-in-one, worth the small extra fees.
If you want your asset allocation to float randomly above or below your target allocation for extended periods of time, then agreed, a target/balanced fund is not for you.
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Re: Splitting out a target date index fund

Post by NostraHistoria »

If you read I Will Teach You to Be Rich by Ramit Sethi, you will see that fees eat up too many profits. It is better to read a lot of excellent books and manage your own portfolio instead of getting a target-date fund.
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Re: Splitting out a target date index fund

Post by wetgear »

Stargazer65 wrote: Fri May 14, 2021 5:19 pm
wetgear wrote: Fri May 14, 2021 4:16 pm
Stargazer65 wrote: Fri May 14, 2021 8:01 am Has anyone ever started in a target date index fund and then later decided to split out of it into regular index funds to save on fees? The difference seems insignificant when the balance is low, but when the balance is larger it seems like a lot more.

Edit: OTOH, if you think that's a bad idea and wouldn't do it, why? Did anyone do the reverse and go from 3 funds into a target date index fund?
What's the ER of the target date fund?
0.12% was the one I would I would consider.
That's a totally reasonable cost.
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Re: Splitting out a target date index fund

Post by bgf »

NostraHistoria wrote: Fri May 14, 2021 6:17 pm If you read I Will Teach You to Be Rich by Ramit Sethi, you will see that fees eat up too many profits. It is better to read a lot of excellent books and manage your own portfolio instead of getting a target-date fund.
OP said the target date fund has an ER of 0.12%. That is a phenomenally low ER. Vanguard, known in the industry for having some of the lowest fees, has an ER of 0.15% for its target date funds.
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Re: Splitting out a target date index fund

Post by vineviz »

NostraHistoria wrote: Fri May 14, 2021 6:17 pm If you read I Will Teach You to Be Rich by Ramit Sethi, you will see that fees eat up too many profits. It is better to read a lot of excellent books and manage your own portfolio instead of getting a target-date fund.
If that is the takeaway someone gets from Sethi's book, it will likely be the most expensive book they ever purchase.
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Re: Splitting out a target date index fund

Post by Tattarrattat »

For a target fund with 0.12% fees, every million dollars invested will cost maybe 600 dollars more per year than doing it with the separate index funds. Not a big deal compared to high fee load funds and financial advisors that can eat up thousands or 10s of thousands a year.
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Re: Splitting out a target date index fund

Post by Tattarrattat »

If you want your asset allocation to float randomly above or below your target allocation for extended periods of time, then agreed, a target/balanced fund is not for you.

Exactly, the loosening of the association with a strict asset allocation is where the higher return comes from, given the general upward trend of markets. Jim Otar in his excellent book recommends rebalancing once every four years.
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Re: Splitting out a target date index fund

Post by retired@50 »

Tattarrattat wrote: Fri May 14, 2021 7:49 pm Exactly, the loosening of the association with a strict asset allocation is where the higher return comes from, given the general upward trend of markets. Jim Otar in his excellent book recommends rebalancing once every four years.
This "higher return" would also come with the bonus of higher risk.

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Re: Splitting out a target date index fund

Post by Tattarrattat »

If by higher risk, you mean higher volatility, yes, sure, a bit, but not that much because you are eventually rebalancing. There's another thread just started that goes into much more detail about rebalancing, including revered investing icons who advocated never rebalancing. Far from a straightforward issue.
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Re: Splitting out a target date index fund

Post by Tattarrattat »

Here's that thread, a lot of nuance on the rebalancing issue:

viewtopic.php?f=10&t=348666&newpost=600 ... ead#unread
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Re: Splitting out a target date index fund

Post by Kookaburra »

David Jay wrote: Fri May 14, 2021 8:45 am Assuming a low-cost TargetDate fund such as Vanguard TargetRetirement, it is highly unlikely that you can recoup the fee difference because you will not be dynamically rebalancing with daily fund in-flows and out-flows, as a TargetDate fund can do.
Dynamically re-balancing every day is not necessarily a good thing. It can drag down returns vs. the use of 5% re-balance bands.
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Re: Splitting out a target date index fund

Post by retired@50 »

Tattarrattat wrote: Fri May 14, 2021 8:20 pm If by higher risk, you mean higher volatility, yes, sure, a bit, but not that much because you are eventually rebalancing. There's another thread just started that goes into much more detail about rebalancing, including revered investing icons who advocated never rebalancing. Far from a straightforward issue.
I don't think of re-balancing as a return enhancement tool, but as a risk (or volatility) control tool. I'm interested in risk control just as much as I'm interested in return.

If I could tolerate 100% equity, I would, but I don't like to stay awake at night worrying about my portfolio.

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Re: Splitting out a target date index fund

Post by bgf »

Kookaburra wrote: Fri May 14, 2021 8:24 pm
David Jay wrote: Fri May 14, 2021 8:45 am Assuming a low-cost TargetDate fund such as Vanguard TargetRetirement, it is highly unlikely that you can recoup the fee difference because you will not be dynamically rebalancing with daily fund in-flows and out-flows, as a TargetDate fund can do.
Dynamically re-balancing every day is not necessarily a good thing. It can drag down returns vs. the use of 5% re-balance bands.
Of course it's a good thing if you want constant exposure to equities. If you want a 75% exposure to equities but are equally happy with it floating up to 80% exposure, then guess what, your allocation should be 80% exposure!

If you say no no no, I want 75% exposure except when it floats up to 80% exposure, well then, you're a market timer.
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Re: Splitting out a target date index fund

Post by David Jay »

Kookaburra wrote: Fri May 14, 2021 8:24 pm
David Jay wrote: Fri May 14, 2021 8:45 am Assuming a low-cost TargetDate fund such as Vanguard TargetRetirement, it is highly unlikely that you can recoup the fee difference because you will not be dynamically rebalancing with daily fund in-flows and out-flows, as a TargetDate fund can do.
Dynamically re-balancing every day is not necessarily a good thing. It can drag down returns vs. the use of 5% re-balance bands.
I believe you are talking about rebalancing by individuals of their (relatively) fixed asset base.

The process is different when there are daily fund flows that can be directed to optimize holdings.
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Re: Splitting out a target date index fund

Post by Tattarrattat »

That's an interesting idea. Assuming it's in a tax sheltered account with free trades, how is the rebalancing done by the target fund different or advantageous than an individual rebalancing on their own every day?
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Re: Splitting out a target date index fund

Post by Tattarrattat »

bgf wrote: Fri May 14, 2021 8:39 pm
Kookaburra wrote: Fri May 14, 2021 8:24 pm
David Jay wrote: Fri May 14, 2021 8:45 am Assuming a low-cost TargetDate fund such as Vanguard TargetRetirement, it is highly unlikely that you can recoup the fee difference because you will not be dynamically rebalancing with daily fund in-flows and out-flows, as a TargetDate fund can do.
Dynamically re-balancing every day is not necessarily a good thing. It can drag down returns vs. the use of 5% re-balance bands.
Of course it's a good thing if you want constant exposure to equities. If you want a 75% exposure to equities but are equally happy with it floating up to 80% exposure, then guess what, your allocation should be 80% exposure!

If you say no no no, I want 75% exposure except when it floats up to 80% exposure, well then, you're a market timer.
Letting 75% drift up to 80% before rebalancing is market timing? I thought that's what a "balancing band" was?
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Re: Splitting out a target date index fund

Post by bgf »

Tattarrattat wrote: Sat May 15, 2021 5:39 am
bgf wrote: Fri May 14, 2021 8:39 pm
Kookaburra wrote: Fri May 14, 2021 8:24 pm
David Jay wrote: Fri May 14, 2021 8:45 am Assuming a low-cost TargetDate fund such as Vanguard TargetRetirement, it is highly unlikely that you can recoup the fee difference because you will not be dynamically rebalancing with daily fund in-flows and out-flows, as a TargetDate fund can do.
Dynamically re-balancing every day is not necessarily a good thing. It can drag down returns vs. the use of 5% re-balance bands.
Of course it's a good thing if you want constant exposure to equities. If you want a 75% exposure to equities but are equally happy with it floating up to 80% exposure, then guess what, your allocation should be 80% exposure!

If you say no no no, I want 75% exposure except when it floats up to 80% exposure, well then, you're a market timer.
Letting 75% drift up to 80% before rebalancing is market timing? I thought that's what a "balancing band" was?
"Balancing bands" are a compromise between market timing and the practical implementation of rebalancing asset allocations comprised of multiple moving parts, ie, multiple funds.

Target date funds don't need to make this compromise. They are able to track to their target allocation much more closely and consistently.
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Re: Splitting out a target date index fund

Post by anil686 »

Tattarrattat wrote: Sat May 15, 2021 5:35 am That's an interesting idea. Assuming it's in a tax sheltered account with free trades, how is the rebalancing done by the target fund different or advantageous than an individual rebalancing on their own every day?
Just a guess but it would be able to do this in “real time” i.e. at the end of the day at NAV due to MF. I think an individual investor could try it with ETFs but my guess is that the bid ask spreads over an entire year may be more than the cost savings btw a TR index fund and it’s index components. Otherwise - you would have to place a mutual fund order at 3:55 EST every day the market is open and guesstimate the re-balancing. JMO though.

Obviously, the emotional component is ignored - as if the market drops or rises by a significant amount in a day (let’s say over 1% in either direction), it can lead to emotions that may make it more difficult to buy or sell on that particular day - again JMO....
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Re: Splitting out a target date index fund

Post by Edward Joseph »

You may save a few basis points, but like others have mentioned, ‘investor BEHAVIOR’ is probably the biggest determinant of investing success.

Using the packaged model keeps you appropriately balanced based on your risk tolerance, prevents you from tinkering too much and from chasing returns.

Yes, you cannot place assets in certain accounts for optimal tax efficiency or tax loss harvest as easily but removing behavioral decisions typically wins out for most investors.
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Re: Splitting out a target date index fund

Post by Kookaburra »

bgf wrote: Fri May 14, 2021 8:39 pm
Kookaburra wrote: Fri May 14, 2021 8:24 pm
David Jay wrote: Fri May 14, 2021 8:45 am Assuming a low-cost TargetDate fund such as Vanguard TargetRetirement, it is highly unlikely that you can recoup the fee difference because you will not be dynamically rebalancing with daily fund in-flows and out-flows, as a TargetDate fund can do.
Dynamically re-balancing every day is not necessarily a good thing. It can drag down returns vs. the use of 5% re-balance bands.
Of course it's a good thing if you want constant exposure to equities. If you want a 75% exposure to equities but are equally happy with it floating up to 80% exposure, then guess what, your allocation should be 80% exposure!

If you say no no no, I want 75% exposure except when it floats up to 80% exposure, well then, you're a market timer.
So you’re saying if one has a target of 75% equities, but let’s it float within a +/- 5% band for re-balancing, then they don’t have constant exposure to equities?? Don’t you mean: exposure to constant equity %?

Also, you didn’t address my central point, which is in regard to whether daily re-balancing is advantageous in terms of your comment of recouping the fee difference.
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Re: Splitting out a target date index fund

Post by bgf »

Kookaburra wrote: Sat May 15, 2021 10:16 am
bgf wrote: Fri May 14, 2021 8:39 pm
Of course it's a good thing if you want constant exposure to equities. If you want a 75% exposure to equities but are equally happy with it floating up to 80% exposure, then guess what, your allocation should be 80% exposure!

If you say no no no, I want 75% exposure except when it floats up to 80% exposure, well then, you're a market timer.
So you’re saying if one has a target of 75% equities, but let’s it float within a +/- 5% band for re-balancing, then they don’t have constant exposure to equities?? Don’t you mean: exposure to constant equity %?

Also, you didn’t address my central point, which is in regard to whether daily re-balancing is advantageous in terms of your comment of recouping the fee difference.
Correct, exposure to constant equity%.

To answer your second question requires actual data over a certain time period and would depend on the actual transactions of the rebalancing band portfolio.

You could probably look at it as 'tracking error' to a target date fund with the same asset allocation, the only variable then being the timing and frequency of rebalancing. I would imagine the <10 basis points of expense ratio would fall within the 'noise' of the tracking error. If that makes sense.
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Re: Splitting out a target date index fund

Post by steve r »

vineviz wrote: Fri May 14, 2021 9:08 am
Unless the fees are criminally high relative to the alternative, I strongly recommend sticking with the target date fund.

The vast majority of investors end up worse off taking a DIY approach. This is because an extra 5 or 10bps in fees is tiny compared to the huge errors people often make like failing to rebalance, setting inappropriate asset allocations, changing funds based on past performance., etc. No one THINKS they will do these things but most people end up DOING these things, so keeping it simple and remaining in the TDF is usually the best course of action.
+1 The behavioral issues are very real and for me are counter productive. :oops:
That said:
ApeAttack wrote: Fri May 14, 2021 11:26 am Another reason to keep individual funds rather than a TDF is if you don't agree with the TDF's allocation for US and ex-US stocks. I'm currently around 75/25 US/ex-US because the arguments for market cap weight (around 45% ex-US) and 0% ex-US both make sense to me. So I split the difference. ...
So, I am half target date and half Vanguard balanced index (a 60 / 40 U.S. split of index funds) ... this also lowers the overall expense ratio, lowers my international bond holding (hedged) which I am not a fan of. I also find that by keeping the two equal, I am much less prone to behavioral issues.
Last edited by steve r on Sun May 16, 2021 10:49 am, edited 1 time in total.
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steve r
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Re: Splitting out a target date index fund

Post by steve r »

Duplicate (meant to edit)
"Owning the stock market over the long term is a winner's game. Attempting to beat the market is a loser's game. ..Don't look for the needle in the haystack. Just buy the haystack." Jack Bogle
Silversides
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Re: Splitting out a target date index fund

Post by Silversides »

I’ve been grappling with this same issue as of late.

My pretax 403(b) plan has Vanguard Target Date funds with completely reasonable 9 BPS fees, though even lower fee Vanguard index fund choices.

However my wife has the Fidelity Target Date funds with 75 BPS fees but also the good low-cost Vanguard index funds.

I’m prone to tinkering so I’ve decided it’s best to keep myself in the TD funds but manage our other accounts (401, 457, Roth) using indexes and carefully mirroring the AA in my 403(b) TD 2045 fund.

This ensures we’re saving on her fees while anchoring our investment decisions to the tried and true Vanguard TD funds. If I dropped the TD fund I would probably underperform through suboptimal rebalancing or stray from the ideal AA over time by chasing performance (urges to have less Int’l lately).

It’s a compromise. I realize that I’m probably best off focusing on earning more vs. getting too cute with fund gymnastics.

Know thy self, right!
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steve r
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Re: Splitting out a target date index fund

Post by steve r »

Silversides wrote: Sun May 16, 2021 2:08 pm I’ve been grappling with this same issue as of late.

My pretax 403(b) plan has Vanguard Target Date funds with completely reasonable 9 BPS fees, though even lower fee Vanguard index fund choices.

However my wife has the Fidelity Target Date funds with 75 BPS fees but also the good low-cost Vanguard index funds.

I’m prone to tinkering so I’ve decided it’s best to keep myself in the TD funds but manage our other accounts (401, 457, Roth) using indexes and carefully mirroring the AA in my 403(b) TD 2045 fund.

This ensures we’re saving on her fees while anchoring our investment decisions to the tried and true Vanguard TD funds. If I dropped the TD fund I would probably underperform through suboptimal rebalancing or stray from the ideal AA over time by chasing performance (urges to have less Int’l lately).

It’s a compromise. I realize that I’m probably best off focusing on earning more vs. getting too cute with fund gymnastics.

Know thy self, right!
Honestly, if you are at Fidelity and do not have the Target Date INDEX I would manage that one account. The match changes. In fact, I did this in the past. I set up something simple to reduce risk of overthinking / behavioral.
"Owning the stock market over the long term is a winner's game. Attempting to beat the market is a loser's game. ..Don't look for the needle in the haystack. Just buy the haystack." Jack Bogle
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Re: Splitting out a target date index fund

Post by dorster »

vineviz wrote: Fri May 14, 2021 7:12 pm
NostraHistoria wrote: Fri May 14, 2021 6:17 pm If you read I Will Teach You to Be Rich by Ramit Sethi, you will see that fees eat up too many profits. It is better to read a lot of excellent books and manage your own portfolio instead of getting a target-date fund.
If that is the takeaway someone gets from Sethi's book, it will likely be the most expensive book they ever purchase.
From a Ramit Sethi tweet a few days ago:
One of the main reasons I encourage target-date funds is automatic rebalancing

In today's environment, you can see exactly why

How many people have had one asset class grow explosively, now dwarfing other investments?


Though it's open to interpretation my read is that Ramit is very concerned about the behavior gap, performance chasing, and diversification. I've never read his book.

Though I do agree with (and find charming the advice to) "read a lot of excellent books".
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