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A Set-It-and-Forget-It Target-Date Series From Vanguard

Leo Acheson, CFA

Leo Acheson: Investors looking for a set-it-and-forget-it option where they can literally invest their entire portfolio should consider Vanguard's Target-Date Retirement Series. The series offers a fund for investors of all different ages. An investor would select a portfolio based on the date that they expect to retire. So, for instance, if you are 50 years old, the 2035 fund would be appropriate because at that point you'd be 65.

The reason why the set-it and forget-it approach is so attractive is that it derisks over time for you automatically so you don’t have to worry about that. So for younger investors, it holds about 90% stocks, and then over time it gradually derisks to about 30% by age 72, where the equity weighting plateaus.

Another very strong benefit of this strategy is its extreme diversification. The series invests in a very broad basket of U.S. stocks, international stocks, U.S. bonds, and international bonds and even offer some inflation protection for investors near retirement.

Last but not least, the fees are of course very attractive with it being a Vanguard offering. Investors can buy this all-in-one option for anywhere from 12 to 15 basis points for an all-in cost. That’s very attractive considering that the average target-date series charges about 50 basis points giving the series a head start to begin with.

We expect the series to continue to outperform its peers as it has done since its 2003 launch.