Flashes1 wrote: ↑Tue Apr 13, 2021 2:54 pm
I suppose the most alarming thing is how high International equities comprise total equity exposure. I've been comfortable with International comprising 15-25% of total equity exposure - but International comprises approximately 41% of equities in the Target 2025 fund. That's out of my comfort zone.
International Bonds comprise 30% of total Bond exposure in the Target 2025 fund and it's not what I was expecting. It just seems very high. I believe foreign Government/Corporate bonds will decline materially worse than U.S. Government/Corporate bonds in a major depression/recession.
Lesson learned: Vanguard Target Retirement funds have a lot of International Bond and Equity exposure - just make sure you're comfortable with it before blindly plowing your life savings in it.
Lesson learned: Make sure you're okay with exactly how the Glide Path works - specifically are you comfortable with Bonds comprising 42% of your portfolio 5 years
before you retire (Target 2025). I personally am comfortable with no more than 40% at retirement. It's just hard when you're choosing your 401k investments at 30-40 years old to know exactly how your bond exposure really ramps up 30 years later and is that what you want?
Successful investing has to do with making rational choices and not feelings of comfort. Vanguards choice of asset allocation is entirely rational. There are differences of opinion about the proper allocation of US vs International investments but those differences have to be more than feelings.
I have been rebalancing from stocks to bonds since July 2013. I don't feel comfortable doing this but rationally I realize that doing nothing would lead to a portfolio increasingly allocated to stocks while I continue to get older. I know that I need to reduce portfolio risk as I get older since I have less and less human capital as I get closer and closer to retirement. All this rebalancing has created discomfort because I realize that not only have I been controlling my risks but also sacrificing performance doing so. I suppose I feel regret knowing that I would have more money now if I had just let things ride.
The point is that successful saving and investing involves doing a whole lot of things that don't feel good at the time. Delayed gratification is not always fun and neither is trimming back on successful investments. It isn't fun to be disciplined and I have refused over the years to chase hot performance. It would be so much more comfortable and emotionally satisfying to be buying hot investments that everyone else is enthusiastic about. It is harder to stay the course with boring but profitable investments.
It is okay that you have differences of opinion with Vanguard regarding asset allocation and glide paths. But you make it sound like Vanguard is pulling the wool over people's eyes and they are not. Again you talk about feeling comfortable but successful investing involves doing a lot of uncomfortable things.
I don't feel comfortable riding out bear markets. Seeing stocks down 35% when you are 61 years old and nearing retirement isn't fun but I knew that I had to just ride the volatility out. The rebalancing described above did limit my losses a bit but I don't feel comfortable knowing that I missed out on the upside.
You sometimes need to do things that are uncomfortable and don't feel good to succeed at investing. Your rational self has to step in sometimes to override your emotional self. You also need to strike a balance between your rational self and your emotional self in order to stay invested in bad markets. Panic selling might provide emotional relief but its effect on long term wealth building is disastrous. Human emotion is powerful and investors should respect it but you have to not let it rule you.
Markets will do what markets will do regardless of my feelings of comfort or whatever I establish as my comfort zone. Sometimes you have to do the rational thing even if it doesn't feel right.
A fool and his money are good for business.