Target date funds ... so much for "set and forget" [and WSJ article]

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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by LadyGeek »

Whakamole wrote: Wed Jan 26, 2022 2:27 pm ...Shareholders quite literally own the funds, according to Vanguard.
From my post: Subject: "Why I Love Vanguard"
LadyGeek wrote: Sun Dec 26, 2021 7:48 am Vanguard's publicity campaign of "own the funds that own the company" is missing one very, very important point about ownership. Your investment in this company has no control in the company's direction. As an "owner", you should have a say in this matter. A true shareholder has voting rights. That's not the case here.

Kudos to Vanguard Marketing for using this unique organizational structure as an advertising campaign.

Let's dig into the details. Forum member Barry Barnitz has written a blog post on exactly how your investment funds Vanguard. See: Vanguard Group Inc. book value, March 7, 2018

For example, Vanguard Total Bond Market's Annual report of December 31, 2020 --> Total Bond Market Index Fund --> Statement of Assets and Liabilities --> Payables to Vanguard --> 6,384 ($000s)

Scroll down to Statement of Operations --> Expenses --> The Vanguard Group—Note B to see the breakdown.

(Those with a sharp eye will notice I linked to the annual report from Fidelity. Why? It's online as a webpage and is easy to copy-n-paste info. The 3rd party provider is Broadridge. Vanguard's recent email to me about fund prospectuses also linked to Broadridge. So, both companies are using the same 3rd party provider.)

As I've said in this post, a company's direction comes from its leadership. Jack Bogle is no longer leading the company.

I have no say in how Vanguard designs its website. My preference is to own Vanguard remotely from Fidelity.
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Re: Rob Berger says vanguard threw me under a bus !

Post by Pizza_and_Beer »

rob wrote: Tue Jan 25, 2022 11:46 pm Those of us in the funds in taxable need to get a cigarette.... I sold mine...
Or a stiff drink. I bit the bullet and sold the remaining target date holdings in my taxable account.

Learning about this debacle and what caused it has definitely led me to question Vanguard's leadership and decision making capability. School of Hard Knocks indeed.
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Re: Rob Berger says vanguard threw me under a bus !

Post by GaryA505 »

Pizza_and_Beer wrote: Wed Jan 26, 2022 3:03 pm
rob wrote: Tue Jan 25, 2022 11:46 pm Those of us in the funds in taxable need to get a cigarette.... I sold mine...
Or a stiff drink. I bit the bullet and sold the remaining target date holdings in my taxable account.

Learning about this debacle and what caused it has definitely led me to question Vanguard's leadership and decision making capability. School of Hard Knocks indeed.
I figure they made the decision on the dollars involved, and the retail investors lost out. To me, it just shows their priorities.
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Re: Rob Berger says vanguard threw me under a bus !

Post by donaldfair71 »

GaryA505 wrote: Wed Jan 26, 2022 3:18 pm
Pizza_and_Beer wrote: Wed Jan 26, 2022 3:03 pm
rob wrote: Tue Jan 25, 2022 11:46 pm Those of us in the funds in taxable need to get a cigarette.... I sold mine...
Or a stiff drink. I bit the bullet and sold the remaining target date holdings in my taxable account.

Learning about this debacle and what caused it has definitely led me to question Vanguard's leadership and decision making capability. School of Hard Knocks indeed.
I figure they made the decision on the dollars involved, and the retail investors lost out. To me, it just shows their priorities.
Just keep in mind that it’s not an issue unique to Vanguard. It’s an issue that can happen, and has happened, in at least one other fund family.

The boogeyman here is Target Date, or fund of funds, in taxable, not necessarily Vanguard.
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Re: Rob Berger says vanguard threw me under a bus !

Post by Pizza_and_Beer »

donaldfair71 wrote: Wed Jan 26, 2022 3:21 pm
GaryA505 wrote: Wed Jan 26, 2022 3:18 pm
Pizza_and_Beer wrote: Wed Jan 26, 2022 3:03 pm
rob wrote: Tue Jan 25, 2022 11:46 pm Those of us in the funds in taxable need to get a cigarette.... I sold mine...
Or a stiff drink. I bit the bullet and sold the remaining target date holdings in my taxable account.

Learning about this debacle and what caused it has definitely led me to question Vanguard's leadership and decision making capability. School of Hard Knocks indeed.
I figure they made the decision on the dollars involved, and the retail investors lost out. To me, it just shows their priorities.
Just keep in mind that it’s not an issue unique to Vanguard. It’s an issue that can happen, and has happened, in at least one other fund family.

The boogeyman here is Target Date, or fund of funds, in taxable, not necessarily Vanguard.

I bought this fund before I knew about the concept of tax efficient placement (for instance, not having fund of funds in a taxable account). I made my peace with having to accept capital gains distributions generated by fund rebalancing and redemptions.

My beef with Vanguard is them creating a run of institutional holders of the target date funds to the door and leaving us smaller investors holding the tax bag. Especially when they were going to merge the retail and institutional classes this year in a presumably tax free event. Why couldn't they just wait until the merger to lower the expense ratio? This just wreaks of poor planning or total disregard for the smaller investor on Vanguard's part.
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Re: Rob Berger says vanguard threw me under a bus !

Post by GaryA505 »

Pizza_and_Beer wrote: Wed Jan 26, 2022 3:41 pm My beef with Vanguard is them creating a run of institutional holders of the target date funds to the door and leaving us smaller investors holding the tax bag. Especially when they were going to merge the retail and institutional classes this year in a presumably tax free event. Why couldn't they just wait until the merger to lower the expense ratio? This is just wreaks of poor planning or total disregard for the smaller investor on Vanguard's part.
You nailed it. I didn't even own the fund and it doesn't sit right with me, at all.
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Re: Taxable account. Never knew that Vanguard can pull the rug under small investors , but they did!

Post by arcticpineapplecorp. »

sleepysurf wrote: Wed Jan 26, 2022 6:25 am
Looking at it from the investor’s point of view, Jason Kephart, a strategist at Morningstar, said even with more disclosure about potential tax implications from such a change, would investors have acted differently?

“What are your options?” he asked. “If you sold out, you would have to pay tax on the overall gains in the account. Vanguard could probably have been more proactive here, but the alternative is selling out of your position and triggering a higher capital gains bill.”
I was thinking this myself. reading through (catching up on several pages of this post) I read at least two people who had the VG TD funds for years, both of whom said something to the effect of "I wish I knew this was going to happen because I would have sold before it occurred", not realizing they would have been generating the cap gains themselves from having sold (just earlier in the year).
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by SimpleGift »

For folks who already own Vanguard balanced funds in taxable accounts, I wonder if the risk of an unfortunate tax event is the same as for the Target Date Funds. Note that Vanguard Balanced Index Fund (VBIAX) already has institutional shares with a $5 million minimum, while Vanguard LifeStrategy Moderate Growth (VSGMX) has no institutional share classes.
What are the potential future risks for these two funds in taxable, for those who can't sell due to large unrealized gains?
Last edited by SimpleGift on Wed Jan 26, 2022 4:13 pm, edited 1 time in total.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by Iorek »

I have seen a number of statements that this problem only occurred because it was a TDF or a fund of funds.

Can someone explain why that matters? If it was a stock only index fund and there was a massive outflow of institutional investors wouldn’t the exact same thing happen?

Is the underlying assumption that a single fund can be structured with different share classes so it would not have triggered redemptions? But doesn’t it appear Vanguard is restructuring these TDF funds anyway? Does that point back to Vanguard as the source of the problem?
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by alex_686 »

Iorek wrote: Wed Jan 26, 2022 4:09 pm I have seen a number of statements that this problem only occurred because it was a TDF or a fund of funds.

Can someone explain why that matters? If it was a stock only index fund and there was a massive outflow of institutional investors wouldn’t the exact same thing happen?

Is the underlying assumption that a single fund can be structured with different share classes so it would not have triggered redemptions? But doesn’t it appear Vanguard is restructuring these TDF funds anyway? Does that point back to Vanguard as the source of the problem?
What you are thinking about is called a multi-manager fund. They exist but I am not sure how common they are. They used to be popular in the active managed mutual fund universe. I think they have fallen out if favor with the rise of passive indexing and other market structure changes.

You are correct that what triggered the capital gains was a massive outflow of money from a mutual fund. Any mutual fund that has a large unrealized capital gain would be vulnerable to the same thing.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by arcticpineapplecorp. »

alex_686 wrote: Wed Jan 26, 2022 4:19 pm
Iorek wrote: Wed Jan 26, 2022 4:09 pm I have seen a number of statements that this problem only occurred because it was a TDF or a fund of funds.

Can someone explain why that matters? If it was a stock only index fund and there was a massive outflow of institutional investors wouldn’t the exact same thing happen?

Is the underlying assumption that a single fund can be structured with different share classes so it would not have triggered redemptions? But doesn’t it appear Vanguard is restructuring these TDF funds anyway? Does that point back to Vanguard as the source of the problem?
What you are thinking about is called a multi-manager fund. They exist but I am not sure how common they are. They used to be popular in the active managed mutual fund universe. I think they have fallen out if favor with the rise of passive indexing and other market structure changes.

You are correct that what triggered the capital gains was a massive outflow of money from a mutual fund. Any mutual fund that has a large unrealized capital gain would be vulnerable to the same thing.
Rob Berger said he was tweeting with Rick Ferri who said this is unlikely to occur with any MF that has a corresponding ETF (like total stock, S&P500, total international, etc). The target date retirement funds don't have a corresponding ETF.

The same can be said of balanced index fund which has an institutional fund but no ETF. If minimums were lowered on balanced index fund institutional we might expect to see a similar run from the more expensive balanced index fund and that would cause the same problem as what occured with the TD funds.

Perhaps Rick Ferri can chime in to add more color to this and/or clarify if Rob Berger understood correctly.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by alex_686 »

arcticpineapplecorp. wrote: Wed Jan 26, 2022 4:27 pm Rob Berger said he was tweeting with Rick Ferri who said this is unlikely to occur with any MF that has a corresponding ETF (like total stock, S&P500, total international, etc). The target date retirement funds don't have a corresponding ETF.
The reason is that the ETF structure allows the fund to side-step capital gains issues from trades becuase technically the portfolio does not trade.

Any advantages (and disadvantages) from the ETF class flows into the fund thus all share classes benefit. Note, Vanguard is the only fund family that has this dual mutual fund / ETF structure due to a US patent.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by Oicuryy »

alex_686 wrote: Wed Jan 26, 2022 1:16 pm They kind of have too. The institutional fund has a independent board whose goal is to maximize value to their shareholders. This includes setting fees. Expanding the asset base is usually considered a positive. They don't have any obligation to the retail fund.

The retail version of the fund has a separate independent board.
That is not how it works in practice at Vanguard. All of their investor target date funds and all of their institutional target date funds are series of Vanguard Chester Funds a Delaware trust. See the prospectus update about the merger.
https://www.sec.gov/Archives/edgar/data ... 9834d1.htm

And here is the one for reducing the minimum investment.
https://www.sec.gov/Archives/edgar/data ... 7598d1.htm

Remember, the tax hit could have been avoided if the merger had been done first.

The same group of people are the trustees of all of the Vanguard trusts. They are also the directors of Vanguard Group Inc. Click the directors tab on this page to see the people who are responsible for the large tax bills this year.
https://about.vanguard.com/who-we-are/our-leaders/

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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by sycamore »

GaryA505 wrote: Wed Jan 26, 2022 2:26 pm As one who has accounts at both Vanguard and Fidelity, AND would like to consolidate at one of them, AND is on the fence about which one to choose, this may help me make a decision. I mean, Vanguard threw their retail investors under the bus once already, so what's to stop them from doing it with other funds? Could VFIAX and VTSAX be next? Why not, nobody saw this one coming either.
"Could VFIAX and VTSAX be next? Why not, nobody saw this one coming either." The problem could apply to Fidelity or other mutual fund companies as well.

Also, a retail fund could (theoretically) have very large redemptions even if Vanguard doesn't do what happened with the TD funds. Imagine: fund X comes along and persuades institutions/401ks to swap out of VTSAX and into fund X. Vanguard has to sell the stocks in VTSAX in order to pay off the leaving shareholders; the capital gains are passed on to the remaining shareholders. At no time did Vanguard do anything to encourage the redemptions. I.e., there are things outside of Vanguard's control that could cause the large cap gains problem for retail investors. It could even happen whether there are institutional share classes or not.

That's all speaking in generalities. Is it likely to happen? Maybe, maybe not. Consider that VTSAX and VFIAX are very low cost already. One reason (among several) that 401k plans got out of the Target Date Investor shares was that the Institutional share fund was significantly cheaper. Does that situation exist with VTSAX and VFIAX? You'd have to ask all the institution/401k plans out there to see if they'd switch to go from VTSAX 0.04% ER to 0.02% or 0.01% or whatever the institutional classes are.

Another factor to consider: how heavily do institutional/401k plans use single asset funds like VTSAX versus Target Date? My understanding is that a very large majority of institutional plan assets are in TD funds (just in general). That suggests the amount of Admiral share assets at risk of moving to cheaper Institutional shares is low enough that even if those assets did switch, it may not affect the Admiral shares all that much. But I don't keep close accounting on the asset amounts. You can look them up on the institutional.vanguard.com site if you're interested.

I would caution against using "what's to stop them from doing it with other funds" line of reasoning to get out of the funds. The problem can happen without Vanguard actually doing anything. And it could also happen with other fund managers, like Fidelity. How do you know they won't commit an operational faux pas (like they did in 2019)?

My opinion is that the problems are very unlikely to happen with VTSAX or VFIAX. Sorry, but I offer no guarantees :)
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by Iorek »

Oicuryy wrote: Wed Jan 26, 2022 4:39 pm
alex_686 wrote: Wed Jan 26, 2022 1:16 pm They kind of have too. The institutional fund has a independent board whose goal is to maximize value to their shareholders. This includes setting fees. Expanding the asset base is usually considered a positive. They don't have any obligation to the retail fund.

The retail version of the fund has a separate independent board.
That is not how it works in practice at Vanguard. All of their investor target date funds and all of their institutional target date funds are series of Vanguard Chester Funds a Delaware trust. See the prospectus update about the merger.
https://www.sec.gov/Archives/edgar/data ... 9834d1.htm

And here is the one for reducing the minimum investment.
https://www.sec.gov/Archives/edgar/data ... 7598d1.htm

Remember, the tax hit could have been avoided if the merger had been done first.

The same group of people are the trustees of all of the Vanguard trusts. They are also the directors of Vanguard Group Inc. Click the directors tab on this page to see the people who are responsible for the large tax bills this year.
https://about.vanguard.com/who-we-are/our-leaders/

Ron
If it really could have been avoided by just doing the merger first I wonder if the directors breached a duty of care to the shareholders.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by dad2000 »

I haven't paid attention to my investments or tax-planning as much as I used to. I just happened to come back here today after starting taxes yesterday and caught this story. Ouch.

Target date funds made sense to me except for those whose entire savings were in their 401k plan, and even then it's usually possible to lower expenses by purchasing 3 index funds.

I've always thought that diversification meant more than holding index funds. I diversified across brokerages (The big 3) and TreasuryDirect once net worth hit $1M. There is risk across brokerages, fund managers, and individual funds. Am I smart enough to quantify each risk? No, but I know they exist. Human error, cybersecurity and fraud are the most obvious to me.

Unfortunately, there is also risk in having too complex of a portfolio, and 3 brokerages may be too much to handle for some. I'm in semi-retirement now and my mind is still capable. Perhaps as I age and spend down, I'll reconsider.

I have to say that I've not been particularly impressed with Vanguard for the last several years. The other two have better technology and have caught up on fees/expenses. Local presence is also comforting. That being said, any of the 3 could still make the next big mistake.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by Lou Sevens »

I did my preliminary taxes today and knew it was coming. I ended up taking the gains and dividends in cash in December as someone mentioned; I then sold in January what I deemed as my "remaining " true gains and will have less taxes. -since then it would have dropped perhaps $6k so I am consideringmyself kind of fortunate.

Over time I am going to set up an exit plan and just get individual funds
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Re: Rob Berger says vanguard threw me under a bus !

Post by briang_g »

UpperNwGuy wrote: Wed Jan 26, 2022 5:00 am
briang_g wrote: Tue Jan 25, 2022 10:56 pm I wanted some place safe to park some money in a brokerage account. I put it in a Target retirement date Vanguard fund. I am not savvy, but knew after tax isn't the best place for this fund, but it was meant short term, a few month. I did this about the middle of December. It was VTHRX.
How did you happen to choose this fund instead of a short-term bond fund, a money market fund, or a high yield savings account? Were you hoping to obtain better yield?
Yes .....
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Re: Rob Berger says vanguard threw me under a bus !

Post by Cubicle »

GaryA505 wrote: Wed Jan 26, 2022 11:10 amCan you explain? Why will mutual funds that have an ETF share class not have this problem?
↑ ... ↓
alex_686 wrote: Wed Jan 26, 2022 4:37 pmThe reason is that the ETF structure allows the fund to side-step capital gains issues from trades becuase technically the portfolio does not trade.

Any advantages (and disadvantages) from the ETF class flows into the fund thus all share classes benefit. Note, Vanguard is the only fund family that has this dual mutual fund / ETF structure due to a US patent.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by briang_g »

All,

OK, kinda exposing my lack of knowledge here .....

I know I will be paying more in taxes but did I get something for it ? (ie, more shares if i asked to convert dividends to shares or whatever is applicable).

Im thinking I just got a bigger tax bill, but did I get something for that ? Aware that sill better off if I had chooses an ETF in after tax account, or mutual fund in tax advantaged account, just trying to figure out how bad a mistake I made exactly.


Thanks,

Randy
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by Da5id »

briang_g wrote: Wed Jan 26, 2022 10:54 pm All,

OK, kinda exposing my lack of knowledge here .....

I know I will be paying more in taxes but did I get something for it ? (ie, more shares if i asked to convert dividends to shares or whatever is applicable).

Im thinking I just got a bigger tax bill, but did I get something for that ? Aware that sill better off if I had chooses an ETF in after tax account, or mutual fund in tax advantaged account, just trying to figure out how bad a mistake I made exactly.


Thanks,

Randy
Nope, you got nothing for it other than the tax bill. Before the dividend you had X dollars worth of investment. After the dividend which was reinvested, you had (X-tax burden). The most benign case for an investor with the Target Date fund in taxable is that their capital gains rate is 0.

Your mistake wasn't bad or really foreseeable. Buying a moderately tax inefficient fund in taxable wasn't outrageous. The real badness occurred because Vanguard's fee changes caused institutions to dump the share class you had, leaving you with the capital gains caused by their redemptions. So Vanguard was the major problem here.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by Tubes »

SimpleGift wrote: Wed Jan 26, 2022 4:08 pm For folks who already own Vanguard balanced funds in taxable accounts, I wonder if the risk of an unfortunate tax event is the same as for the Target Date Funds. Note that Vanguard Balanced Index Fund (VBIAX) already has institutional shares with a $5 million minimum, while Vanguard LifeStrategy Moderate Growth (VSGMX) has no institutional share classes.
What are the potential future risks for these two funds in taxable, for those who can't sell due to large unrealized gains?
I don't know, but it would hit me hard. Before I understood a whole lot of what I was doing 20+ years ago, I put quite a bit in VBIAX. I am working on drawing it down through donations, but I can only sell so much per year due to the cap gains hit.

I'm seriously thinking about making 2022 a year for capital gains only and avoiding Roth conversions in order to eat up some of these gains.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by HanSolo »

Tubes wrote: Thu Jan 27, 2022 5:32 am
SimpleGift wrote: Wed Jan 26, 2022 4:08 pm For folks who already own Vanguard balanced funds in taxable accounts, I wonder if the risk of an unfortunate tax event is the same as for the Target Date Funds. Note that Vanguard Balanced Index Fund (VBIAX) already has institutional shares with a $5 million minimum, while Vanguard LifeStrategy Moderate Growth (VSGMX) has no institutional share classes.

...

What are the potential future risks for these two funds in taxable, for those who can't sell due to large unrealized gains?
I don't know, but it would hit me hard. Before I understood a whole lot of what I was doing 20+ years ago, I put quite a bit in VBIAX. I am working on drawing it down through donations, but I can only sell so much per year due to the cap gains hit.
Since VBIAX already has an institutional share class, doesn't that make it less likely for an institutional divestiture from the fund?

I hold VBIAX in taxable, and since I expect to remain in a low tax bracket, I'm not seeing a reason to get out of it. As far as I can tell, many Vanguard funds, including VBIAX, had unusually high distributions last year (check out VCMDX, about a quarter of the fund). So I'm thinking maybe we've seen the worst already (?).

I think that, in general, the problem is that although we can easily look up the yields, and with a little more effort, find past distributions, there isn't much information available to investors about what to expect in terms of the distribution characteristics of the various funds (capital gains distributions, qualified vs. non-qualified dividends, etc.). We talk a lot about tax efficiency, but the lack of such information makes tax-efficient portfolio construction harder, in my opinion.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by longinvest »

Da5id wrote: Wed Jan 26, 2022 11:10 pm
briang_g wrote: Wed Jan 26, 2022 10:54 pm All,

OK, kinda exposing my lack of knowledge here .....

I know I will be paying more in taxes but did I get something for it ? (ie, more shares if i asked to convert dividends to shares or whatever is applicable).

Im thinking I just got a bigger tax bill, but did I get something for that ? Aware that sill better off if I had chooses an ETF in after tax account, or mutual fund in tax advantaged account, just trying to figure out how bad a mistake I made exactly.


Thanks,

Randy
Nope, you got nothing for it other than the tax bill. Before the dividend you had X dollars worth of investment. After the dividend which was reinvested, you had (X-tax burden). The most benign case for an investor with the Target Date fund in taxable is that their capital gains rate is 0.
(I added the emphasis)

Da5id, isn't there an increase in cost basis equal to the automatically reinvested capital gain distribution, reducing future capital gains by an equal amount when the investment is eventually sold?
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by Da5id »

longinvest wrote: Thu Jan 27, 2022 6:11 am
Da5id wrote: Wed Jan 26, 2022 11:10 pm
briang_g wrote: Wed Jan 26, 2022 10:54 pm All,

OK, kinda exposing my lack of knowledge here .....

I know I will be paying more in taxes but did I get something for it ? (ie, more shares if i asked to convert dividends to shares or whatever is applicable).

Im thinking I just got a bigger tax bill, but did I get something for that ? Aware that sill better off if I had chooses an ETF in after tax account, or mutual fund in tax advantaged account, just trying to figure out how bad a mistake I made exactly.


Thanks,

Randy
Nope, you got nothing for it other than the tax bill. Before the dividend you had X dollars worth of investment. After the dividend which was reinvested, you had (X-tax burden). The most benign case for an investor with the Target Date fund in taxable is that their capital gains rate is 0.
(I added the emphasis)

Da5id, isn't there an increase in cost basis equal to the automatically reinvested capital gain distribution, reducing future capital gains by an equal amount when the investment is eventually sold?
Taken as a package it is not good. You could get the same outcome by selling 15% of your shares for a positive capital gain every year and buying them back to reset the basis. Involuntary vs voluntary tax gain harvesting? But sure, you could consider that "getting something" under some circumstances. If you die without selling the shares any potential future diminution of tax burden caused by the higher basis is lost due to step up basis though.

Pretty hard to make lemonade out of these lemons.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by burritoLover »

Vanguard's 2020 TDF had a $1.56/share distribution in 2020 - not as bad as last December ($5.27!), but that $1.56/distribution convinced me to get out of TDFs in taxable even though my Vanguard TDF didn't have any distributions in 2020. So this is nothing new just new levels of extreme. Even in 2020, if you retired with $1 mil in the 2020 TDF, you'd have a $50,290 capital gain distribution ($1.56/share at $31.02 price) that you'd have to pay taxes on. Now granted, not many will have that amount in taxable but if you are a high saver, that is certainly possible.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by Da5id »

burritoLover wrote: Thu Jan 27, 2022 8:16 am Vanguard's 2020 TDF had a $1.56/share distribution in 2020 - not as bad as last December ($5.27!), but that $1.56/distribution convinced me to get out of TDFs in taxable even though my Vanguard TDF didn't have any distributions in 2020. So this is nothing new just new levels of extreme. Even in 2020, if you retired with $1 mil in the 2020 TDF, you'd have a $50,290 capital gain distribution ($1.56/share at $31.02 price) that you'd have to pay taxes on. Now granted, not many will have that amount in taxable but if you are a high saver, that is certainly possible.
Huh. That is much worse than the later year Vanguard TDFs in 2020. Is it an inherent feature of TDFs that there are progressively increasing net redemptions from the fund after the target date passes? Some people are reinvesting dividends of course, but others are spending down, and there are probably many fewer new investors/401k contibutions/etc after the target date. Just speculation as to why the 2020 TDF had such big relative capital gains distributions compared to the 2055 TDF in 2020. If true, a bigger strike against TDF in taxable (separate from the specific Vanguard issue in this thread).

Does anyone have data on the AUM trajectory for TDFs from Vanguard (or any provider really) after the target date passes?
Last edited by Da5id on Thu Jan 27, 2022 8:40 am, edited 1 time in total.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by burritoLover »

Da5id wrote: Thu Jan 27, 2022 8:30 am
burritoLover wrote: Thu Jan 27, 2022 8:16 am Vanguard's 2020 TDF had a $1.56/share distribution in 2020 - not as bad as last December ($5.27!), but that $1.56/distribution convinced me to get out of TDFs in taxable even though my Vanguard TDF didn't have any distributions in 2020. So this is nothing new just new levels of extreme. Even in 2020, if you retired with $1 mil in the 2020 TDF, you'd have a $50,290 capital gain distribution ($1.56/share at $31.02 price) that you'd have to pay taxes on. Now granted, not many will have that amount in taxable but if you are a high saver, that is certainly possible.
Huh. That is much worse than the later year Vanguard TDFs in 2020. Is it an inherent feature of TDFs that there are progressively increasing net redemptions from the fund after the target date passes? Some people are reinvesting dividends of course, but others are spending down, and there are probably many fewer new investors/401k contibutions/etc after the target date. Just speculation as to why the 2020 TDF had such big relative capital gains distributions compared to the 2055 TDF in 2020. If true, a bigger strike against TDF in taxable (separate from the specific Vanguard issue in this thread).
Like I said, it is new levels of extreme but $1.56 is not peanuts either. This point is more to counter those saying that this was a one-time deal and it may be at those levels but large-ish distributions are not unheard of here.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by Da5id »

burritoLover wrote: Thu Jan 27, 2022 8:40 am
Da5id wrote: Thu Jan 27, 2022 8:30 am
burritoLover wrote: Thu Jan 27, 2022 8:16 am Vanguard's 2020 TDF had a $1.56/share distribution in 2020 - not as bad as last December ($5.27!), but that $1.56/distribution convinced me to get out of TDFs in taxable even though my Vanguard TDF didn't have any distributions in 2020. So this is nothing new just new levels of extreme. Even in 2020, if you retired with $1 mil in the 2020 TDF, you'd have a $50,290 capital gain distribution ($1.56/share at $31.02 price) that you'd have to pay taxes on. Now granted, not many will have that amount in taxable but if you are a high saver, that is certainly possible.
Huh. That is much worse than the later year Vanguard TDFs in 2020. Is it an inherent feature of TDFs that there are progressively increasing net redemptions from the fund after the target date passes? Some people are reinvesting dividends of course, but others are spending down, and there are probably many fewer new investors/401k contibutions/etc after the target date. Just speculation as to why the 2020 TDF had such big relative capital gains distributions compared to the 2055 TDF in 2020. If true, a bigger strike against TDF in taxable (separate from the specific Vanguard issue in this thread).
Like I said, it is new levels of extreme but $1.56 is not peanuts either. This point is more to counter those saying that this was a one-time deal and it may be at those levels but large-ish distributions are not unheard of here.
Sure. I was just wondering if this is an inherent feature of TDFs past the retirement date. It has no consequence in tax sheltered accounts, but if people are net sellers due to decreased purchases in retirement and increased sales to take RMDs or to live on, seems like those having it in taxable will face progressively higher distributions. Can't see how that wouldn't probably be true, but curious if there is data to show it.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by burritoLover »

Da5id wrote: Thu Jan 27, 2022 8:42 am
burritoLover wrote: Thu Jan 27, 2022 8:40 am
Da5id wrote: Thu Jan 27, 2022 8:30 am
burritoLover wrote: Thu Jan 27, 2022 8:16 am Vanguard's 2020 TDF had a $1.56/share distribution in 2020 - not as bad as last December ($5.27!), but that $1.56/distribution convinced me to get out of TDFs in taxable even though my Vanguard TDF didn't have any distributions in 2020. So this is nothing new just new levels of extreme. Even in 2020, if you retired with $1 mil in the 2020 TDF, you'd have a $50,290 capital gain distribution ($1.56/share at $31.02 price) that you'd have to pay taxes on. Now granted, not many will have that amount in taxable but if you are a high saver, that is certainly possible.
Huh. That is much worse than the later year Vanguard TDFs in 2020. Is it an inherent feature of TDFs that there are progressively increasing net redemptions from the fund after the target date passes? Some people are reinvesting dividends of course, but others are spending down, and there are probably many fewer new investors/401k contibutions/etc after the target date. Just speculation as to why the 2020 TDF had such big relative capital gains distributions compared to the 2055 TDF in 2020. If true, a bigger strike against TDF in taxable (separate from the specific Vanguard issue in this thread).
Like I said, it is new levels of extreme but $1.56 is not peanuts either. This point is more to counter those saying that this was a one-time deal and it may be at those levels but large-ish distributions are not unheard of here.
Sure. I was just wondering if this is an inherent feature of TDFs past the retirement date. It has no consequence in tax sheltered accounts, but if people are net sellers due to decreased purchases in retirement and increased sales to take RMDs or to live on, seems like those having it in taxable will face progressively higher distributions. Can't see how that wouldn't probably be true, but curious if there is data to show it.
Would be interesting to see - I'd also like to know how Vanguard's CG distributions historically compare with other TDFs. We need someone who has a lot of time on theirs hands to get on this ASAP (a retired BH nerd).
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by Da5id »

burritoLover wrote: Thu Jan 27, 2022 8:50 am
Da5id wrote: Thu Jan 27, 2022 8:42 am
burritoLover wrote: Thu Jan 27, 2022 8:40 am
Da5id wrote: Thu Jan 27, 2022 8:30 am
burritoLover wrote: Thu Jan 27, 2022 8:16 am Vanguard's 2020 TDF had a $1.56/share distribution in 2020 - not as bad as last December ($5.27!), but that $1.56/distribution convinced me to get out of TDFs in taxable even though my Vanguard TDF didn't have any distributions in 2020. So this is nothing new just new levels of extreme. Even in 2020, if you retired with $1 mil in the 2020 TDF, you'd have a $50,290 capital gain distribution ($1.56/share at $31.02 price) that you'd have to pay taxes on. Now granted, not many will have that amount in taxable but if you are a high saver, that is certainly possible.
Huh. That is much worse than the later year Vanguard TDFs in 2020. Is it an inherent feature of TDFs that there are progressively increasing net redemptions from the fund after the target date passes? Some people are reinvesting dividends of course, but others are spending down, and there are probably many fewer new investors/401k contibutions/etc after the target date. Just speculation as to why the 2020 TDF had such big relative capital gains distributions compared to the 2055 TDF in 2020. If true, a bigger strike against TDF in taxable (separate from the specific Vanguard issue in this thread).
Like I said, it is new levels of extreme but $1.56 is not peanuts either. This point is more to counter those saying that this was a one-time deal and it may be at those levels but large-ish distributions are not unheard of here.
Sure. I was just wondering if this is an inherent feature of TDFs past the retirement date. It has no consequence in tax sheltered accounts, but if people are net sellers due to decreased purchases in retirement and increased sales to take RMDs or to live on, seems like those having it in taxable will face progressively higher distributions. Can't see how that wouldn't probably be true, but curious if there is data to show it.
Would be interesting to see - I'd also like to know how Vanguard's CG distributions historically compare with other TDFs. We need someone who has a lot of time on theirs hands to get on this ASAP (a retired BH nerd).
From the TDF 2015 annual report (linked from here https://personal.vanguard.com/us/faces/ ... ducts=true), CG distributions were:
2017 .307
2018 .532
2019 .639
2020 .355
2021 .765

General upward trend of capital gains distributions, though 2020 is the odd year out.

What IS clear is that the AUM of the 2015 fund is falling.
Yr AUM (billions)
2017 $17,250
2018 $16,410
2019 $15,647
2020 $15,233
2021 $12,967

Compare that to TDF 2030, which has a general upward trend in assets (with 2021 being due to the institutional TDF switch maybe???)
Yr AUM (billions)
2017 $30,877
2018 $35,913
2019 $39,114
2020 $42,285
2021 $36,946

Huh. I imagine this is a known behavior of TDFs. But I wasn't aware of it. Seems like an additional reason not to buy TDFs in taxable unless I'm misinterpreting things.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by burritoLover »

Da5id wrote: Thu Jan 27, 2022 8:59 am
burritoLover wrote: Thu Jan 27, 2022 8:50 am
Da5id wrote: Thu Jan 27, 2022 8:42 am
burritoLover wrote: Thu Jan 27, 2022 8:40 am
Da5id wrote: Thu Jan 27, 2022 8:30 am

Huh. That is much worse than the later year Vanguard TDFs in 2020. Is it an inherent feature of TDFs that there are progressively increasing net redemptions from the fund after the target date passes? Some people are reinvesting dividends of course, but others are spending down, and there are probably many fewer new investors/401k contibutions/etc after the target date. Just speculation as to why the 2020 TDF had such big relative capital gains distributions compared to the 2055 TDF in 2020. If true, a bigger strike against TDF in taxable (separate from the specific Vanguard issue in this thread).
Like I said, it is new levels of extreme but $1.56 is not peanuts either. This point is more to counter those saying that this was a one-time deal and it may be at those levels but large-ish distributions are not unheard of here.
Sure. I was just wondering if this is an inherent feature of TDFs past the retirement date. It has no consequence in tax sheltered accounts, but if people are net sellers due to decreased purchases in retirement and increased sales to take RMDs or to live on, seems like those having it in taxable will face progressively higher distributions. Can't see how that wouldn't probably be true, but curious if there is data to show it.
Would be interesting to see - I'd also like to know how Vanguard's CG distributions historically compare with other TDFs. We need someone who has a lot of time on theirs hands to get on this ASAP (a retired BH nerd).
From the TDF 2015 annual report (linked from here https://personal.vanguard.com/us/faces/ ... ducts=true), CG distributions were:
2017 .307
2018 .532
2019 .639
2020 .355
2021 .765

General upward trend of capital gains distributions, though 2020 is the odd year out.

What IS clear is that the AUM of the 2015 fund is falling.
Yr AUM (billions)
2017 $17,250
2018 $16,410
2019 $15,647
2020 $15,233
2021 $12,967

Compare that to TDF 2030, which has a general upward trend in assets (with 2021 being due to the institutional TDF switch maybe???)
Yr AUM (billions)
2017 $30,877
2018 $35,913
2019 $39,114
2020 $42,285
2021 $36,946

Huh. I imagine this is a known behavior of TDFs. But I wasn't aware of it. Seems like an additional reason not to buy TDFs in taxable unless I'm misinterpreting things.
I was thinking the TDFs at/near retirement date had steeper glidepath changes year to year and that rebalancing was causing the capital gain distributions but maybe that's an oversimplification.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by Da5id »

burritoLover wrote: Thu Jan 27, 2022 9:03 am
Da5id wrote: Thu Jan 27, 2022 8:59 am Huh. I imagine this is a known behavior of TDFs. But I wasn't aware of it. Seems like an additional reason not to buy TDFs in taxable unless I'm misinterpreting things.
I was thinking the TDFs at/near retirement date had steeper glidepath changes year to year and that rebalancing was causing the capital gain distributions but maybe that's an oversimplification.
Well, net outflows also have to be a contributor. https://investor.vanguard.com/mutual-fu ... ions/vtwnx says that unrealized appreciation is 30.9% of NAV. If there are net outflows, presumably that unrealized appreciation will become realized at some point?
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by burritoLover »

Da5id wrote: Thu Jan 27, 2022 9:06 am
burritoLover wrote: Thu Jan 27, 2022 9:03 am
Da5id wrote: Thu Jan 27, 2022 8:59 am Huh. I imagine this is a known behavior of TDFs. But I wasn't aware of it. Seems like an additional reason not to buy TDFs in taxable unless I'm misinterpreting things.
I was thinking the TDFs at/near retirement date had steeper glidepath changes year to year and that rebalancing was causing the capital gain distributions but maybe that's an oversimplification.
Well, net outflows also have to be a contributor. https://investor.vanguard.com/mutual-fu ... ions/vtwnx says that unrealized appreciation is 30.9% of NAV. If there are net outflows, presumably that unrealized appreciation will become realized at some point?
Yeah, good point.
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Re: Rob Berger says vanguard threw me under a bus !

Post by AlohaJoe »

GaryA505 wrote: Wed Jan 26, 2022 3:18 pm
Pizza_and_Beer wrote: Wed Jan 26, 2022 3:03 pm
rob wrote: Tue Jan 25, 2022 11:46 pm Those of us in the funds in taxable need to get a cigarette.... I sold mine...
Or a stiff drink. I bit the bullet and sold the remaining target date holdings in my taxable account.

Learning about this debacle and what caused it has definitely led me to question Vanguard's leadership and decision making capability. School of Hard Knocks indeed.
I figure they made the decision on the dollars involved, and the retail investors lost out. To me, it just shows their priorities.
Why do you think Vanguard should give preference to retail investors over people who invest in a 401k?
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Re: Rob Berger says vanguard threw me under a bus !

Post by GaryA505 »

AlohaJoe wrote: Thu Jan 27, 2022 9:09 am
GaryA505 wrote: Wed Jan 26, 2022 3:18 pm
Pizza_and_Beer wrote: Wed Jan 26, 2022 3:03 pm
rob wrote: Tue Jan 25, 2022 11:46 pm Those of us in the funds in taxable need to get a cigarette.... I sold mine...
Or a stiff drink. I bit the bullet and sold the remaining target date holdings in my taxable account.

Learning about this debacle and what caused it has definitely led me to question Vanguard's leadership and decision making capability. School of Hard Knocks indeed.
I figure they made the decision on the dollars involved, and the retail investors lost out. To me, it just shows their priorities.
Why do you think Vanguard should give preference to retail investors over people who invest in a 401k?
I don't, and I didn't say that. Do you think Vanguard should give preference to people who invest in a 401k over retail investors?
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by sycamore »

Da5id wrote: Thu Jan 27, 2022 8:59 am ...
What IS clear is that the AUM of the 2015 fund is falling.
Yr AUM (billions)
2017 $17,250
2018 $16,410
2019 $15,647
2020 $15,233
2021 $12,967
...
With Vanguard's TD funds, the most recent fund (2015 now) will merge into the Target Retirement Income fund. The merge takes place I believe 7 years after the date in the fund name.

So whether or not there's an underlying trend to the AUM, it will come to an end eventually.

Maybe the AUM of the TR Income fund is the more relevant one for investors who would stick with TR funds for the long haul?
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by Da5id »

sycamore wrote: Thu Jan 27, 2022 10:32 am
Da5id wrote: Thu Jan 27, 2022 8:59 am ...
What IS clear is that the AUM of the 2015 fund is falling.
Yr AUM (billions)
2017 $17,250
2018 $16,410
2019 $15,647
2020 $15,233
2021 $12,967
...
With Vanguard's TD funds, the most recent fund (2015 now) will merge into the Target Retirement Income fund. The merge takes place I believe 7 years after the date in the fund name.

So whether or not there's an underlying trend to the AUM, it will come to an end eventually.

Maybe the AUM of the TR Income fund is the more relevant one for investors who would stick with TR funds for the long haul?
I wasn't aware of that, I've never owned a TDF. Thanks. That mitigates it certainly, though there are apparently increased taxes due to AUM decreasing resulting in CG distributions in the intervening years.

If one buys anything like a TR fund in taxable, I personally assume it is for the long haul. At some point selling it will cause a large capital gains hit.
But who knows?
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by GaryA505 »

Is Vanguard planning any more fund consolidations into a single share class? This could happen again with other funds, even a 500 or Total Stock fund. I don't really see any constraints on this sort of thing, and with the competition to get to the lowest fees I can see it continuing. Many Vanguard institutional share classes have $5M minimums. What if they lowered those to $2M or $1M?

Is the only way to avoid the consequences to use all ETFs in taxable?
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by mervinj7 »

GaryA505 wrote: Thu Jan 27, 2022 10:50 am Is Vanguard planning any more fund consolidations into a single share class? This could happen again with other funds, even a 500 or Total Stock fund. I don't really see any constraints on this sort of thing, and with the competition to get to the lowest fees I can see it continuing. Many Vanguard institutional share classes have $5M minimums. What if they lowered those to $2M or $1M?

Is the only way to avoid the consequences to use all ETFs in taxable?
Fidelity consolidated their index fund share classes a few years ago (2018) and lowered all ERs to the Institutional Premium levels. There was no crazy capital gains at the time, so it's definitely feasible. I'm sure Vanguard can do the same eventually.

https://www.fidelity.com/bin-public/060 ... esting.pdf
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by GaryA505 »

mervinj7 wrote: Thu Jan 27, 2022 11:00 am
GaryA505 wrote: Thu Jan 27, 2022 10:50 am Is Vanguard planning any more fund consolidations into a single share class? This could happen again with other funds, even a 500 or Total Stock fund. I don't really see any constraints on this sort of thing, and with the competition to get to the lowest fees I can see it continuing. Many Vanguard institutional share classes have $5M minimums. What if they lowered those to $2M or $1M?

Is the only way to avoid the consequences to use all ETFs in taxable?
Fidelity consolidated their index fund share classes a few years ago (2018) and lowered all ERs to the Institutional Premium levels. There was no crazy capital gains at the time, so it's definitely feasible. I'm sure Vanguard can do the same eventually.

https://www.fidelity.com/bin-public/060 ... esting.pdf
That's crazy, it would appear that Fidelity is way ahead of Vanguard on this one.
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by cas »

GaryA505 wrote: Thu Jan 27, 2022 10:50 am Is Vanguard planning any more fund consolidations into a single share class? This could happen again with other funds, even a 500 or Total Stock fund. I don't really see any constraints on this sort of thing, and with the competition to get to the lowest fees I can see it continuing. Many Vanguard institutional share classes have $5M minimums. What if they lowered those to $2M or $1M?
You and others have brought this up a bunch of times since yesterday, when LadyGeek merged new threads into this existing thread (basically pages 6-7 of this thread).

A key point that people seem to be missing is that exchanges between share classes of the same fund is *not* a taxable event. Exchanges between separate funds *is* a taxable event. (This was addressed multiple times in pages 1-5 of this thread.)

So here is some homework for you:

For your fund of interest ... Look up whether the institutional share class is a separate fund from the retail share class(es) or whether it is a separate share class of the same fund as the retail shares classes. Among other places, this can be determined by looking at the annual report.

You might also be interested in this thread, which was born out of one of the many previous iterations of the discussion in the current thread. (The thread title says "Fidelity" but ends up being a broader discussion):
Is there a realistic scenario that could force Fidelity's 500 Index Fund to issue a huge capital gains distribution?:
Last year, Fidelity's target date index funds issued enormous capital gains distributions, all thanks to Fidelity swapping out one total stock market fund for another.

This year, much to the dismay of some loyal Bogleheads, Vanguard's target date index funds did exactly the same thing, possibly due to similar shenanigans regarding the shuffling of internal funds.

Question: I understand that this exact scenario could not happen to a simple index fund like Fidelity 500. But what could happen? Is there a realistic scenario that would lead to Fidelity being forced to distribute their 40%+ in unrealized gains?
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by Whakamole »

cas wrote: Thu Jan 27, 2022 12:22 pm A key point that people seem to be missing is that exchanges between share classes of the same fund is *not* a taxable event. Exchanges between separate funds *is* a taxable event. (This was addressed multiple times in pages 1-5 of this thread.)
I don't see anyone here saying otherwise. The problem is that the individual investor would need to know:
(a) that there are institutional shares;
(b) that these shares are not the same fund as individual shares;
(c) that Vanguard lowered the minimum of institutional class shares from $100M to $5M;
(d) that there was a large outlay of funds from individual shares to institutional shares as a result;
(e) the fund had a large amount of unrealized capital gains;
(f) that fund outlays without an offset of new contributions were high enough to force a capital gains payout.

Even if you read the annual report and knew (a) and (b), I doubt individual investors would be aware of (c)-(f).

We can derive (d) - at least a large outlay of funds without knowing the reason - by looking at the net assets of the fund, but who is looking at that?

(e) is readily available, but is non-actionable - the unrealized capital gains of VTI is ~$139 a share, am I not supposed to buy it?
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by GaryA505 »

VTSAX and VITPX/VITSX are not share classes of the same fund. However, VITPX/VITSX are share classes of the same fund

Vanguard Retail:
VTSAX (Vanguard Total Stock) - ER 0.04%, minimum investment $3000

Vanguard Institutional (2 classes)
VITSX (Vanguard Total Stock Market Index Fund Institutional Shares) - ER 0.03%, minimum $5,000,000
VITPX (Vanguard Total Stock Market Index Fund Institutional Plus Shares) - ER 0.02%, minimum $100,000,000

Fidelity (only one fund and one class):
FSKAS (Fidelity Total Market Index Fund) - ER 0.015%, minimum 0

OK then, let's go! Vanguard drops the minimum on VITPX to $5,000,000. There is a massive outflow from VTSAX into VITPX, large enough that the cap gains can't be "absorbed" by VTI. What happens?
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by cas »

GaryA505 wrote: Thu Jan 27, 2022 1:25 pm VTSAX and VITPX/VITSX are not share classes of the same fund. However, VITPX/VITSX are share classes of the same fund
Where, specifically, are you finding the information that Vanguard Total Stock Admiral is a different fund (as opposed to a different share class) from Vanguard Total Stock Institutional/Institutional Plus?

The annual report doesn't agree with you.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by GaryA505 »

cas wrote: Thu Jan 27, 2022 1:43 pm
GaryA505 wrote: Thu Jan 27, 2022 1:25 pm VTSAX and VITPX/VITSX are not share classes of the same fund. However, VITPX/VITSX are share classes of the same fund
Where, specifically, are you finding the information that Vanguard Total Stock Admiral is a different fund (as opposed to a different share class) from Vanguard Total Stock Institutional/Institutional Plus?

The annual report doesn't agree with you.
From the Vanguard Total Stock Institutional/Institutional Plus annual report:
"Vanguard Institutional Total Stock Market Index Fund Fund is registered under the Investment
Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two
classes of shares: Institutional Shares and Institutional Plus Shares. Each of the share classes has
different eligibility and minimum purchase requirements, and is designed for different types of
investors."
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by GaryA505 »

cas wrote: Thu Jan 27, 2022 1:43 pm
GaryA505 wrote: Thu Jan 27, 2022 1:25 pm VTSAX and VITPX/VITSX are not share classes of the same fund. However, VITPX/VITSX are share classes of the same fund
Where, specifically, are you finding the information that Vanguard Total Stock Admiral is a different fund (as opposed to a different share class) from Vanguard Total Stock Institutional/Institutional Plus?

The annual report doesn't agree with you.
The annual report for Total Stock states it differently:
"Vanguard Total Stock Market Index Fund is registered under the Investment Company Act of 1940
as an open-end investment company, or mutual fund. The fund offers six classes of shares:
Investor Shares, ETF Shares, Admiral Shares, Institutional Shares, Institutional Plus Shares, and
Institutional Select Shares. Each of the share classes has different eligibility and minimum
purchase requirements, and is designed for different types of investors. ETF Shares are listed for
trading on NYSE Arca; they can be purchased and sold through a broker."

So which one is correct?
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
Dusn
Posts: 217
Joined: Thu Feb 15, 2018 8:59 am

Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by Dusn »

What are the actionable lessons that people are taking from this?

1) obviously don’t own target date funds in taxable accounts


2) even when using vanguard it may be better to buy the ETF rather than the mutual fund in taxable accounts??

Unfortunately all my investments are in mutual funds (vtsax, vtiax) But should I try to only buy ETFs with new money and dividends in the future?
cas
Posts: 2258
Joined: Wed Apr 26, 2017 8:41 am

Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by cas »

GaryA505 wrote: Thu Jan 27, 2022 1:50 pm From the Vanguard Total Stock Institutional/Institutional Plus annual report:
GaryA505 wrote: Thu Jan 27, 2022 1:54 pm The annual report for Total Stock states it differently:

[. . .]

So which one is correct?
Where did you find a link to an annual report for just the institutional/institutional plus share classes?

I don't doubt that you did, but I'm looking at Vanguard's own fund pages (e.g. https://investor.vanguard.com/mutual-fu ... file/VSMPX) and clicking on the "View prospectus and reports -> annual report" link. No matter which of the 6 share classes, that link always takes me to the Total Stock annual report that says there are 6 share classes.
Last edited by cas on Thu Jan 27, 2022 2:11 pm, edited 1 time in total.
GaryA505
Posts: 2909
Joined: Wed Feb 08, 2017 1:59 pm
Location: New Mexico

Re: Target date funds ... so much for "set and forget" [and WSJ article]

Post by GaryA505 »

cas wrote: Thu Jan 27, 2022 2:03 pm
GaryA505 wrote: Thu Jan 27, 2022 1:50 pm From the Vanguard Total Stock Institutional/Institutional Plus annual report:
GaryA505 wrote: Thu Jan 27, 2022 1:54 pm The annual report for Total Stock states it differently:

[. . .]

So which one is correct?
Where did you find a link to an annual report for just the institutional/institutional plus share classes?

I don't doubt that you did, but I'm looking at Vanguard's own fund pages and clicking on the "annual report" link. No matter which of the 6 share classes, that link always takes me to the Total Stock annual report that says there are 6 share classes.
https://personal.vanguard.com/us/faces/ ... ducts=true

Page 74, first paragraph.
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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