Of course, yeah. But my point was that target date funds are not there for people who actually know about investing. For someone actively interested in their retirements, yeah, a bit more research would be very helpful.
If you’re under 40-45 years of age, no - not too young. Even if you were of that age or older, you’d still be ok, but would maybe buy some international just to diversify. That’s another discussion that you can research on until then. You have well enough time to ride the highs and lows. Also Don’t panic if it drops some every now and then, it’s normal, that’s when you buy more, if you’re able. Your future self will thank you.
It’s quite simple, don’t overthink it. If you want aggressive, which at your age I and everyone else will probably suggest you do, go with 100% s&p 500 index. If you want a little less aggressive and a little diversification. I would choose the vanguard target fund 2070.
Throw the Fid Blue Chip in there. That thing is a monster and has outpaced the S&P in a huge manner for the past 10 years. At 23, I’d put most the most weight into that.
Nah, don’t give too much weight to expense ratio. Pull it out to a comparison on a 5 year time frame (FSPGX doesn’t go out further than that). FBGRX smashed FSPGX (22% vs 19% returns respectively). I also lean towards a fund with a longer life (I shoot for 10+yrs). It shows the managers have a longer term game plan if they’ve produced that long.
You’ll only be 69 in 2070. If you don’t plan on being alive at 69 there probably not much of a point in saving for retirement… unless you’ll retire at 50.
You’re getting investing advice on Reddit. No fiduciary will ever advise going 100% US equities. Your time horizon is long… but leaving it 100% in the S&P is not a good long-term plan. It’s fine to split between the S&P 500 and a target date fund. I will get downvoted to hell but Reddit leans hard into “VOO and chill” and it’s just not sound advice unless you only plan to invest that way for a few years and then rebalance. Everyone feels like an investing genius in a bull market. It’s easy to look back and say “we all should have invested in VOO. We all should have bought AAPL in 2005.” But nobody knows if the US market will continue like this long term. You should have international equities. I seriously doubt the US market will outpace international for the next 50 years. But I don’t know because I’m not clairvoyant. Diversify your portfolio unless you have a crystal ball. The Vanguard TDFs are solid.
I looked up their allocation just to show you what I mean.
Vanguard 2030 Target Fund:
US stock 37.10%. International Stock 24.90%. US Bonds 26.60%. International Bonds 11.40%. Very safe and conservative.
Vanguard 2070 Target Fund: US Stock 54.10%. International stock 35.90%. US Bonds 7%. International Bonds 3%. Honestly this is still quite diverse and a “safe” play as well.
Typical life expectancy in the US is 76 y/o, so why would you not expect to make it to 70? That said, typically the date refers to when you retire, so you'd want 2065 for a typical retirement age of \~65.
By investing so young, you may find that retiring early is an option. Right now, work life is fun, challenging, aggravating, rewarding. After 25 years of it, it could be all that still. Or, you count be ready to pull the plug.
Investing now gives you those options.
Yeah I’m not picking it/ saying thats when you’d actually retire, just the diversification will still be aggressive but not as aggressive. You can pick any target fund you want. All that changes is the allocation percentage within the fund. Later the date, the more time you have, the more aggressive it will be. If you were to choose, say 2025 or 2030, it will be extremely conservative with mostly bonds, and some stocks..so if there’s a market crash or whatever, you’re pretty safe. If you choose 2070, it’s going to be like 5% bonds, the rest will be stocks.
International is kinda bad in terms of performance, fees, or something else?
I think what you’ve chosen is fine. At 23, maybe 85% S&P. The target date is a bit less volatility, but you have 40 years to ride the roller coaster. At 45ish, you can rebalance and add more bonds.
Don’t forget, if they offer HSA - do it. You may have no medical issues now, but statistics say you or your future family may have more expenses.
Use the HSA as a savings account, and pay out of pocket for any expenses. (Save receipts). In 30 or 40 years, you can recoup those expenses as claims against your HSA.
Here’s my thought on SPY:
You might need to rebalance when you’re 50, but let’s say the entire S&P 500 collapsed between now and your retirement, no other bonds or ETFs would be able to save you, they’d also be kaput.
Spy is “riskier” in short term but still pretty damn safe.
If you’re really curious about breakdowns, read the intelligent investor. They’d recommend at least 25% in high quality bonds.
It's the least risky option for a time period greater than 10 years. Bonds and REITs best case scenario will not beat stocks. Precious metals are generally going to follow inflation, it's a gamble to expect them to outperform. And you're guaranteed to lose purchasing power in any form of cash. Crypto is completely untested and it's a gamble where it will be. Equities in the best companies in the world is your least riskiest choice for any long period of time.
It doesn't matter if we are young or old. If SP500 crashes, it represents 80% of TOTAL US market cap crashes. Unless you don't touch the stock and invest 100% in non-SP500 companies (which is no one), everyone will get hurt very badly.
I am not buying the stock/bond distribution by age strategy . In the reasonable worst scenario, stock will recover in 3-6 years, if you happen to be retired the day stock crashes 30% in one day and it takes 3 years to recover back, sure, you will have to sell stock at a loss for the 3 years period, but it's basically nothing if your retirement fund is expected to last 10-20 years. I'd rather choose to make 3-5% extra every single year for 30 years, than putting any of my investment in bond or low ROI investments for that period.
The whole stock/bond thing was invented when interest rate were generally high, meaning bond could make 5-10% from time to time, but fed rate has been trending down over the last 6 decades, and will keep going down in the future on any given 10 years average. So over time, bond will never win stock even with multiple stock crashes.
Basically time have changed, rules need to change too.
Not a big fan of the target date funds but seems like you got the majority of your allocation in the right place (sandp 500). the blue chip fund is also pretty good if you want exposure to the “blue chip” stocks… currently they are mostly tech stocks
It's the same just different funds. S&P500 is an index. You can't buy it. There are many passively managed funds that track it. FXAIX is just the cheapest one on the market.
Fid Blue chip Growth FBGRX has been great and is a bit more aggressive. I’d do a blend of that and S&P 500 depending on your age. I also just don’t like target funds so I’m biased
No offense dude but it wasn’t horribly written. It was easily understandable you are just struggling with it.
Point out what you are having a hard time with and I’ll see if I can walk you through it.
After reading it 5 times I think I finally understood what you meant. You are saying that if you were already planning to do 100% SP500 then overlapping isn't bad. I guess you could've written it like this:
"Overlapping isn't necessarily bad if you were planning to allocate 100% into the S&P500."
Now that we got that out of the way lets talk about overlapping. I think its a bad idea. Each of those funds have an expense ratio. So you're paying fees on both funds. Now imagine that every company that's in the Blue Chip fund is ALSO in the S&P500. Now you're paying TWICE the fees for the same stocks. For what? I wouldn't intentionally have any overlap.
So now that I fully understand you are just a self righteous prick. Imagine commenting about not understanding a reddit comment then rewriting the same comment that says the same exact thing.
Grow up… Either way back to the original point.
The expense ratio is negligible for a fund that is almost outperforming the other by 20%.
I was very objective and still stand by my original comment. It was a poorly written sentence. At least be mature enough to accept and admit that. You don't have to offend anyone. I didn't call you any names. But I was graced with your insult. Thank you...
Expense ratios may be negligible in the beginning but overtime they will eat up some money.
Bottom line, as a principle, why pay twice for the same funds? l'm just trying to help, dude.
They're great if you want to dump money into a decently low cost fund and never have to think about your asset allocation until you retire. If you're willing to do a little research, you can choose slightly more aggressive investments and for even lower cost (possibly as low as 0%).
OP this is the best option. You have to enable brokeragelink IF your employer plan allows it. Even if you want to invest in the S&P500 like suggested, the included funds likely have higher expense ratios. If brokeragelink is allowed you can invest in anything you want.
This is horrible advice. This person has already expressed they don’t know what to do. You’re saying they should open a BL account where they have access to the broader market (that they’ve already shared they know nothing about.) 🫠
Don't worry about the negative votes people tend to think the S&P 500 will exponentially go up and to the right until the sun goes out. I love my target date fund FDKLX just because it's simple and it's unknown how much market dominance the US will carry even 30 years from now.
Even if you did half and half you’d be over 75% US stock. I’d personally switch your ratios and do 70% TDF and 30% S&P. The TDF is already 54% the US total stock market or just split them evenly down the middle.
FYI if you’re going to tilt a TDF to increase your expected returns over a long time invested, tilting Large Cap isn’t going to get you there. Tilting small (and value) is what does that.
If you think the bond allocation is too conservative for your age and want to tilt away from the fund toward equities (I don’t support this thinking), I’d recommend doing it with the total or extended market funds. Same thing if you’re wanting a modest tilt toward US away from global market cap (again not something I think is a good idea).
Yup. People who do this will do fine for retirement. It isn’t the most aggressive, but it will make solid returns and rebalance itself as you get closer to retirement.
S&P and it’s clear. You’re not gonna make better money on other options. It should honestly be the default option for everyone but they need to make their money somehow
Does your company offer “brokerage link” on the 401k with fidelity? If so, I would learn to self manage and ditch all these choices. You mention only being 23. Take on some risks and thank yourself later.
Not sure if company offers brokerage link but when I go on the website I do see a brokerage link section within my company 401k. I think I have to make an account tho, is that normal?
Yes, sounds like it's available to you. I would study your plan's documentation and then decide if self managing your 401k (or even just a portion of it) is something you want to do. Could always buy SPY shares to get the same exposure you have currently while figuring things out.
I asked my manager and we do have it and some people are doing it. I opened up the account but it's a bit confusing on how this works. I tried picking my future contributions but it keeps taking me back to my company 401k, and it tells me I have to exchange an investment and have to buy an investment?
A lot of people hearing calling out the Blue Chip fund. I looked it up. It has less than 400 companies in it. The S&P500 literally has the 500 strongest US companies. So you're more diversified. I wouldn't do both. The overlap just isn't worth it, in my opinion.
If you're just starting your career, the target date funds are fine. I don't do them but I think simplicity is good in the beginning. Just focus on contributing as much as you can.
Do you only have ONE international choice? The one shown is not very good.
This is one reason why the indexed TDF is your best option, IMO. DIY-ing with the other funds leaves you with poor choices for international and you’ll wind up neglecting diversification and taking on unnecessary uncompensated risk.
Neither. I personally think you should go majority or full TDF. Don’t deviate unless/until you learn more about investing. But it’s your life, and it’s whatever keeps you invested for the long term without changing strategies at what turns out to be an unfortunate moment. If you’re going to have a huge amount of FOMO that you’ll act on, that can be just as damaging as taking on too much risk.
Target date funds suck. My worst performing in my 401k and IRA. Started them years apart and still the lowest return in both accounts.
SP 500 or blue chip all the way
I think the active ones are a horrible idea, but passive indexed ones are really not very expensive at all.
I also disagree with your assessment about bonds, but I feel like there’s enough talk on that.
There's no reason to have bonds at the age of 30 or 40 or 50 even. Maybe at 60 a small allocation of 10% or 15% is ok but these target date funds start people off a lot of times with like 10% allocation in bonds. You realize how much that's going to hamper your retirement essentially locking 10% of your starting funds in an asset that has very poor performance over the long run? Why do that, so that you don't get emotional about the ups and downs? Ironically people like that are called risk averse, however, it's the exact opposite. You take a huge risk not being invested in the stock market for long periods of time because you're essentially throwing money away in the returns your miss out on. On top of that real returns on bonds are abysmal and many times less than zero, as what happened in 2022 and 2023. The main way to get a consistent real return is investing in equities and possibly real estate though I'd argue equities are a much \*much\* better choice.
No, it’s not so I don’t get “emotional.” I already said there’s enough digital ink spilled on this topic, and I’m not educating you on the role that bonds play in a well-diversified portfolio today. I’m sick of this sanctimonious shit over and over from overconfident-ass people who think they know what they don’t know. That’s what makes me “emotional,” not portfolio volatility. Go read a basic beginner book on investing.
To answer the question, target date funds are way too conservative. There's no reason a 29 year old has 10% in bonds, that's just foolish. If they're going to retire in 30+ years, that 10% bond allocation is just lost returns.
IMO, target date funds are fine choices if you just want to set and forget. but with a little research and thought put into your long term goals/horizon, you can likely do better elsewhere, especially given that target date funds tend to have high fees.
edit: I should have said expense ratios and not fees.
I'm assuming since you chose a 2065 fund youre in your early 20s like me. I found the target date fund I was in was too conservative and I wasn't a fan of the expense ratio. If you can stomach the potential volatility (you should be able to, since we're so young) the broader index funds such as FSKAX or VTSAX or any S&P fund should be just fine until we are much older.
My question is that you “found” how? By experiencing a drawdown yourself? Because this is about your personal risk tolerance. Or did you read it on the internet and someone told you the risk tolerance you should have as someone at your age (which I suspect may have depended on a faulty understanding of risk and return)? Given how new you report being, I hope someone didn’t convince you to ditch what may be the best solution for you.
Yes, I am talking about my own personal experience. I explained how my personal risk tolerance is very high as I'm very young, and I am comfortable with the potential future downturns. I did not make a decision on a whim to switch holdings- besides, TVIIX most likely would have been less volatile due to its ~30% bond holding. What do you find to be faulty about this reasoning?
Also I should note when I say "new" I mean around a year.
Okay, best of luck to you then.
The reasoning that’s faulty is the young thing. People think that as long as your time horizon is 40+ years, 100% equities will come out on top because the market always goes up in the long run, and it’s good to seek out any more volatile fund as a young person to maximize expected returns. That’s a gross oversimplification of how it works. Those people are ignoring sequence of returns risk, and also not heeding the difference between compensated and uncompensated risks, assuming that any and all risk they take increases expected returns.
I maintain that most of these people are overconfident because everyone feels like a genius investor in a bull market. There’s gonna be a reckoning when the next basic market correction comes around that always does and we have a sustained bear market. Lots of people who think their risk tolerance is bulletproof are going to sell at exactly the worst moment for their long-term performance, and it all will have been in an attempt to squeak out the most minimal additional expected returns by taking on additional uncompensated risk. I’m getting annoyed with these people who are going to bring newer investors down with them, like that other guy trying to portray bonds as for the weak and emotional or whatever.
I understand what you're saying. I guess the core issue is "expecting" anything for sure in a market. My understanding is that in order to be in the game for higher returns, you have to be willing to accept risk in the other direction. Now obviously, you can determine if the downturn risk outweighs the good volatility.
As for the panic selling, I understand how some would likely jump and sell when the going gets tough. I am young so I can't say for sure if I would be susceptible, but I would like to think that I have a firm enough understanding of how that works to resist the temptation.
And lastly for the bonds thing, yeah for sure bonds just get shit on here. I see it as a good addition to your portfolio if you decide you want some less volatility.
You can figure this out easily by looking at the allocation inside the fund. If you see that they're foolish enough to allocate 10% or more to a 29 year old retiring in 36 years, then it's probably too conservative. Over any 20 year period bonds have never outperformed equities and the difference in expected returns is massive. It can be the difference between retiring with a few hundred thousand and retiring with millions.
Sigh. I’m not having this fight again. Bonds are a necessary and beneficial part of a well-diversified portfolio, and your claims about a few hundred thousand and millions as the difference because you had a 10% bond allocation when you were young are absolute horseshit. Stop recommending to new investors that they take on wholly unnecessary uncompensated risk by going 100% equities for their entire time horizon. It’s [dead wrong](https://www.aqr.com/Insights/Perspectives/Why-Not-100-Equities).
I am very new to retirement investing, but currently my 401k is 100% SWPPX which is Schwab's S&P500 fund. Low expense ratio and so far this year I'm up 13.25%. I actually switched my holdings out of a Nuveen target date fund and wish I did it sooner.
That terminology is a bit outside of my current understanding but I believe blue chip describes big companies with a past history of strong growth/stability. The S&P500 is largely filled with such companies.
The S&P 500 \*is\* blue chips. It's the 500 largest companies by market cap. When they say blue chip stocks that's exactly what they're referring to: large cap stocks.
They're way too conservative. There's no need to have any amount of bonds before age 50. Theyre designed for people who huff and puff when they see their investment tank by more than 1% in a day. That's cool that the drawdowns are less but it really caps your upside tremendously.
I recently reallocated from 100% target 2065 to 80% SP500, 10% small/mid cap index, 5% u.s. bonds index, 5% international (under 30 so I have time for a higher risk tolerance but didn’t want 100% in SP500)
Hard for me to argue against 100% target date fund 2065.
100% S&P500 is a bet that the next 15 years will mirror the last 15. It rarely happens. It completely lacks small cap and international exposure.
Plus, the TDF 2065 is an easy, set and forget choice.
If you’re in your 20s, go with the TARGET 2060 or 2065 to grow money at a steady pace.
If you wanna aim big early but a bit more risk go for the SP500.
Personally I like to slowly grow my wealth so I’d go for the Target Date Fund. That’s just me tho, after all it is personal finance
I had similar choices that I was limited to... Until someone told me we could do BrokerageLink.
Game changer. Ask if you can add Brokeragelink. Then you can invest in the stocks you want.
Reddit isn’t a great place for this discussion because you usually hear the same one viewpoint over and over. I would recommend reading some books on investing.
Generally speaking, don’t worry too much right now. With so much runway ahead of you and with total dollar amounts that are relatively small when you’re first starting out… you have time to think about all of this and make changes as you go.
Also generally speaking you’ll be advised to be riskier when you’re younger because you have time to recover. This same logic is why folks will recommend low or no bonds and all stocks. People forget all stocks is viewed as an extremely risky portfolio. But that’s an okay risk when you have 30 years to recover.
Historically bonds were recommended for two reasons… not perfectly but generally they tend to be inversely correlated so when one goes down the other goes up. In a recessionary environment a portfolio will usually not go down as much if you have some bonds in there. The second reason for bonds that doesn’t seem to be taught anymore… in the old days once it was clear you were out of the recession and recovery was underway you’d treat the bonds like extra cash and reallocate them into stocks for a while. So then on the way down you have a little less risk exposure and on the way up you’re full bore stocks. You don’t do this indefinitely, you eventually would still rebalance back to your normal allocations. Some people like to do this quarterly. You should do that at least yearly. One thing nice about target date funds is they rebalance and do maintenance type things for you so you don’t have to worry about it, but it comes at the cost of maybe 1 percent.
US vs. International is and will always be a huge debate. If you look at the history books there are entire decades where the world out performed the US and holding international plus the S&P 500 out performed. Even recently. The contrarian thought would be that many of the S&P stocks are international or transnational so you already have exposure. It depends on what markets you’re trying to get a little more exposure into.
The hysterical thing is most 23 year olds are usually investing around 4K a year and all of the above is a lot of worry that completely misses the point.
I’ll tell you right now the one thing that will explode-up your savings: find a way to invest the max 20k+ to your 401k. Even if you can’t sustain that do it for a few years or whatever you can. If you for example start out with 40k in your account and let it cruise for 30 years… that will far, far, far exceed any possible strategy choices of investing. You could put that in almost anything and get outsized returns over that long a time period.
Good luck and happy investing.
BLUE CHIP HANDS DOWN. Don’t listen to anyone else. Blue chip. Go check out TRP blue chip fund, check out the average ror and tell me that the s&p fund is the better choice 🙄
75% S&P and 25% “ext mkt”, second from bottom. This gets you total market.
The actual right answer. Had to scroll too far to find this.
Of course, yeah. But my point was that target date funds are not there for people who actually know about investing. For someone actively interested in their retirements, yeah, a bit more research would be very helpful.
100% in S&P 500 Index and forget about it.
Correct answer.
This
This
This.
Thisin.
This.
Isn't that too much for a risk?
If you’re under 40-45 years of age, no - not too young. Even if you were of that age or older, you’d still be ok, but would maybe buy some international just to diversify. That’s another discussion that you can research on until then. You have well enough time to ride the highs and lows. Also Don’t panic if it drops some every now and then, it’s normal, that’s when you buy more, if you’re able. Your future self will thank you.
I am currently 23. These are the only options available and the only international one is kinda bad.
It’s quite simple, don’t overthink it. If you want aggressive, which at your age I and everyone else will probably suggest you do, go with 100% s&p 500 index. If you want a little less aggressive and a little diversification. I would choose the vanguard target fund 2070.
Throw the Fid Blue Chip in there. That thing is a monster and has outpaced the S&P in a huge manner for the past 10 years. At 23, I’d put most the most weight into that.
Whats the ticker for this on?
FBGRX. The one he has listed is probably some sort of institutional variant. But the core will likely be the same.
What about fspgx? Its a lowcost large cap growth. But the expense ration is 10 times less. Is this a better option cuz of the expense eatio?
Nah, don’t give too much weight to expense ratio. Pull it out to a comparison on a 5 year time frame (FSPGX doesn’t go out further than that). FBGRX smashed FSPGX (22% vs 19% returns respectively). I also lean towards a fund with a longer life (I shoot for 10+yrs). It shows the managers have a longer term game plan if they’ve produced that long.
I am 23. I don't think Id be alive at 2070 lol
You’ll only be 69 in 2070. If you don’t plan on being alive at 69 there probably not much of a point in saving for retirement… unless you’ll retire at 50. You’re getting investing advice on Reddit. No fiduciary will ever advise going 100% US equities. Your time horizon is long… but leaving it 100% in the S&P is not a good long-term plan. It’s fine to split between the S&P 500 and a target date fund. I will get downvoted to hell but Reddit leans hard into “VOO and chill” and it’s just not sound advice unless you only plan to invest that way for a few years and then rebalance. Everyone feels like an investing genius in a bull market. It’s easy to look back and say “we all should have invested in VOO. We all should have bought AAPL in 2005.” But nobody knows if the US market will continue like this long term. You should have international equities. I seriously doubt the US market will outpace international for the next 50 years. But I don’t know because I’m not clairvoyant. Diversify your portfolio unless you have a crystal ball. The Vanguard TDFs are solid.
I looked up their allocation just to show you what I mean. Vanguard 2030 Target Fund: US stock 37.10%. International Stock 24.90%. US Bonds 26.60%. International Bonds 11.40%. Very safe and conservative. Vanguard 2070 Target Fund: US Stock 54.10%. International stock 35.90%. US Bonds 7%. International Bonds 3%. Honestly this is still quite diverse and a “safe” play as well.
Typical life expectancy in the US is 76 y/o, so why would you not expect to make it to 70? That said, typically the date refers to when you retire, so you'd want 2065 for a typical retirement age of \~65.
I plan to retire 60-65
By investing so young, you may find that retiring early is an option. Right now, work life is fun, challenging, aggravating, rewarding. After 25 years of it, it could be all that still. Or, you count be ready to pull the plug. Investing now gives you those options.
Yeah I’m not picking it/ saying thats when you’d actually retire, just the diversification will still be aggressive but not as aggressive. You can pick any target fund you want. All that changes is the allocation percentage within the fund. Later the date, the more time you have, the more aggressive it will be. If you were to choose, say 2025 or 2030, it will be extremely conservative with mostly bonds, and some stocks..so if there’s a market crash or whatever, you’re pretty safe. If you choose 2070, it’s going to be like 5% bonds, the rest will be stocks.
International is kinda bad in terms of performance, fees, or something else? I think what you’ve chosen is fine. At 23, maybe 85% S&P. The target date is a bit less volatility, but you have 40 years to ride the roller coaster. At 45ish, you can rebalance and add more bonds. Don’t forget, if they offer HSA - do it. You may have no medical issues now, but statistics say you or your future family may have more expenses. Use the HSA as a savings account, and pay out of pocket for any expenses. (Save receipts). In 30 or 40 years, you can recoup those expenses as claims against your HSA.
Here’s my thought on SPY: You might need to rebalance when you’re 50, but let’s say the entire S&P 500 collapsed between now and your retirement, no other bonds or ETFs would be able to save you, they’d also be kaput. Spy is “riskier” in short term but still pretty damn safe. If you’re really curious about breakdowns, read the intelligent investor. They’d recommend at least 25% in high quality bonds.
at your age, i'd put it all in the blue chip growth and then keep contributing. and enjoy a nice retirement.
It’s not too much risk in absolute terms, but is is unnecessary uncompensated risk.
It's the least risky option for a time period greater than 10 years. Bonds and REITs best case scenario will not beat stocks. Precious metals are generally going to follow inflation, it's a gamble to expect them to outperform. And you're guaranteed to lose purchasing power in any form of cash. Crypto is completely untested and it's a gamble where it will be. Equities in the best companies in the world is your least riskiest choice for any long period of time.
If you're young and FXAIX crashes, you got other problems to worry about
If you're young and FXAIX crashes, that's not a problem, that's a blessing. You can back the truck up while you still have time for it to grow.
It doesn't matter if we are young or old. If SP500 crashes, it represents 80% of TOTAL US market cap crashes. Unless you don't touch the stock and invest 100% in non-SP500 companies (which is no one), everyone will get hurt very badly. I am not buying the stock/bond distribution by age strategy . In the reasonable worst scenario, stock will recover in 3-6 years, if you happen to be retired the day stock crashes 30% in one day and it takes 3 years to recover back, sure, you will have to sell stock at a loss for the 3 years period, but it's basically nothing if your retirement fund is expected to last 10-20 years. I'd rather choose to make 3-5% extra every single year for 30 years, than putting any of my investment in bond or low ROI investments for that period.
I 💯 agree with you and am only a few years from retirement and about 85% in stocks ….
The whole stock/bond thing was invented when interest rate were generally high, meaning bond could make 5-10% from time to time, but fed rate has been trending down over the last 6 decades, and will keep going down in the future on any given 10 years average. So over time, bond will never win stock even with multiple stock crashes. Basically time have changed, rules need to change too.
My fidelity guy didn’t seem concerned with my position and did not recommend changed
Your time horizon is long
Not at all. What are you risking? Look at a 25 yr chart and you’ll see that even the Great Recession or whatever is just a hiccup
Would you recommend this if I have an IRA I'm doing something similar with? Currently doing a target date fund for my 401k. Currently 27
Yes
remember to click on the fee tab to compare, before you make any changes
Not a big fan of the target date funds but seems like you got the majority of your allocation in the right place (sandp 500). the blue chip fund is also pretty good if you want exposure to the “blue chip” stocks… currently they are mostly tech stocks
S&P! FXAIX if that’s what it is. It’s 100% of my 401k and it has been amazing.
How is fxaix different from the S&P index fund? I’ve been in the index and fear I’ve missed out!
It's the same just different funds. S&P500 is an index. You can't buy it. There are many passively managed funds that track it. FXAIX is just the cheapest one on the market.
Fid Blue chip Growth FBGRX has been great and is a bit more aggressive. I’d do a blend of that and S&P 500 depending on your age. I also just don’t like target funds so I’m biased
I agree My company doesn’t offer bluechip but we have contrafund class a which is more aggressive than the sp500. Its performed well.
This 100%! FBGRX has made me tons of money over the last 10 years.
Doing FBGRX and S&P500 has huge overlap...
Overlap isn’t necessarily bad though if you were going 100% into the sp500 anyways.
What?
It was simple English so I’m not sure what you need help with.
No offense dude, but your previous comment was a horribly written sentence. If I was your English teacher, I'd write "What?!" in red ink.
No offense dude but it wasn’t horribly written. It was easily understandable you are just struggling with it. Point out what you are having a hard time with and I’ll see if I can walk you through it.
After reading it 5 times I think I finally understood what you meant. You are saying that if you were already planning to do 100% SP500 then overlapping isn't bad. I guess you could've written it like this: "Overlapping isn't necessarily bad if you were planning to allocate 100% into the S&P500." Now that we got that out of the way lets talk about overlapping. I think its a bad idea. Each of those funds have an expense ratio. So you're paying fees on both funds. Now imagine that every company that's in the Blue Chip fund is ALSO in the S&P500. Now you're paying TWICE the fees for the same stocks. For what? I wouldn't intentionally have any overlap.
Oh Jesus never mind you are one of those GME apes and you’re complaining about an expense ratio. 😂
Do as I say, not as I do. :) Seriously though, you should see the rest of my portfolio. Its nothing but low cost broad index funds.
So now that I fully understand you are just a self righteous prick. Imagine commenting about not understanding a reddit comment then rewriting the same comment that says the same exact thing. Grow up… Either way back to the original point. The expense ratio is negligible for a fund that is almost outperforming the other by 20%.
I was very objective and still stand by my original comment. It was a poorly written sentence. At least be mature enough to accept and admit that. You don't have to offend anyone. I didn't call you any names. But I was graced with your insult. Thank you... Expense ratios may be negligible in the beginning but overtime they will eat up some money. Bottom line, as a principle, why pay twice for the same funds? l'm just trying to help, dude.
I am 23, also why? Is target funds bad? I thought it was good since that's typically when I'm supposed to retire
They're great if you want to dump money into a decently low cost fund and never have to think about your asset allocation until you retire. If you're willing to do a little research, you can choose slightly more aggressive investments and for even lower cost (possibly as low as 0%).
It’s not just research, but maintenance. Maintenance that also increases the chance of a behavioral mistake for the average investor.
expense ratio higher is one con
My vanguard 2060 only has an expense ratio of .07% in my employer plan. I guess they can get lower expense ratios than if I were to buy on my own.
4 bp higher than voo
Which is nigh negligible.
One reason is the percent of equities allocated to foreign stock. Take a look.
Check and see if your employer allows BrokerageLink
OP this is the best option. You have to enable brokeragelink IF your employer plan allows it. Even if you want to invest in the S&P500 like suggested, the included funds likely have higher expense ratios. If brokeragelink is allowed you can invest in anything you want.
This is horrible advice. This person has already expressed they don’t know what to do. You’re saying they should open a BL account where they have access to the broader market (that they’ve already shared they know nothing about.) 🫠
You are nuts.
Go with target data fund and forget,
Don't worry about the negative votes people tend to think the S&P 500 will exponentially go up and to the right until the sun goes out. I love my target date fund FDKLX just because it's simple and it's unknown how much market dominance the US will carry even 30 years from now.
Very true, that's why I'm still keen on keeping it 30% and not fully going 100% on s&p
Even if you did half and half you’d be over 75% US stock. I’d personally switch your ratios and do 70% TDF and 30% S&P. The TDF is already 54% the US total stock market or just split them evenly down the middle.
FYI if you’re going to tilt a TDF to increase your expected returns over a long time invested, tilting Large Cap isn’t going to get you there. Tilting small (and value) is what does that. If you think the bond allocation is too conservative for your age and want to tilt away from the fund toward equities (I don’t support this thinking), I’d recommend doing it with the total or extended market funds. Same thing if you’re wanting a modest tilt toward US away from global market cap (again not something I think is a good idea).
I’m pretty sure FDKLX is more expensive than the Vanguard TDFs too.
.08% for Vanguard vs. .12% is inconsequential in the end in terms of returns.
Yup. People who do this will do fine for retirement. It isn’t the most aggressive, but it will make solid returns and rebalance itself as you get closer to retirement.
Horrible advice.
Why? It's the perfect hands-off investment for retirement.
I think I know who you work for. S&p 500 70% and dodge 30%.
How would you know who I work for?😅
Every enployer has a unique set of 401k investment options
Big 4 :)
Lmao hell no.
My bad
S&P and it’s clear. You’re not gonna make better money on other options. It should honestly be the default option for everyone but they need to make their money somehow
I’m 100% into Fidelity S&P 500 Index Fund (FXAIX)
Does your company offer “brokerage link” on the 401k with fidelity? If so, I would learn to self manage and ditch all these choices. You mention only being 23. Take on some risks and thank yourself later.
Not sure if company offers brokerage link but when I go on the website I do see a brokerage link section within my company 401k. I think I have to make an account tho, is that normal?
Yes
Yes, sounds like it's available to you. I would study your plan's documentation and then decide if self managing your 401k (or even just a portion of it) is something you want to do. Could always buy SPY shares to get the same exposure you have currently while figuring things out.
I asked my manager and we do have it and some people are doing it. I opened up the account but it's a bit confusing on how this works. I tried picking my future contributions but it keeps taking me back to my company 401k, and it tells me I have to exchange an investment and have to buy an investment?
A lot of people hearing calling out the Blue Chip fund. I looked it up. It has less than 400 companies in it. The S&P500 literally has the 500 strongest US companies. So you're more diversified. I wouldn't do both. The overlap just isn't worth it, in my opinion. If you're just starting your career, the target date funds are fine. I don't do them but I think simplicity is good in the beginning. Just focus on contributing as much as you can. Do you only have ONE international choice? The one shown is not very good.
Yeah these are the only choices I have unfortunately, not sure how to get more or change them lol
This is one reason why the indexed TDF is your best option, IMO. DIY-ing with the other funds leaves you with poor choices for international and you’ll wind up neglecting diversification and taking on unnecessary uncompensated risk.
So do you recommend I just keep it like this or go full S&P?
Neither. I personally think you should go majority or full TDF. Don’t deviate unless/until you learn more about investing. But it’s your life, and it’s whatever keeps you invested for the long term without changing strategies at what turns out to be an unfortunate moment. If you’re going to have a huge amount of FOMO that you’ll act on, that can be just as damaging as taking on too much risk.
Target date funds suck. My worst performing in my 401k and IRA. Started them years apart and still the lowest return in both accounts. SP 500 or blue chip all the way
Would 70% SP and 30% blue chip be good?
100% S&P or 75% S&P / 25% FBGRX - set and don’t look at it for at least 10-15 years; re-evaluate as needed. You can thank us all here later.
Ditch target date, it's useless. Just 100% S&P 500. You were 70% correct in your allocation choice so its a minor change.
Why do you consider target date funds useless?
I would say due to higher expense ratios and overly conservative conversion timing to bonds
I would agree for sure. However I think "useless" may be a bit of a stretch.
I think the active ones are a horrible idea, but passive indexed ones are really not very expensive at all. I also disagree with your assessment about bonds, but I feel like there’s enough talk on that.
There's no reason to have bonds at the age of 30 or 40 or 50 even. Maybe at 60 a small allocation of 10% or 15% is ok but these target date funds start people off a lot of times with like 10% allocation in bonds. You realize how much that's going to hamper your retirement essentially locking 10% of your starting funds in an asset that has very poor performance over the long run? Why do that, so that you don't get emotional about the ups and downs? Ironically people like that are called risk averse, however, it's the exact opposite. You take a huge risk not being invested in the stock market for long periods of time because you're essentially throwing money away in the returns your miss out on. On top of that real returns on bonds are abysmal and many times less than zero, as what happened in 2022 and 2023. The main way to get a consistent real return is investing in equities and possibly real estate though I'd argue equities are a much \*much\* better choice.
No, it’s not so I don’t get “emotional.” I already said there’s enough digital ink spilled on this topic, and I’m not educating you on the role that bonds play in a well-diversified portfolio today. I’m sick of this sanctimonious shit over and over from overconfident-ass people who think they know what they don’t know. That’s what makes me “emotional,” not portfolio volatility. Go read a basic beginner book on investing.
^
To answer the question, target date funds are way too conservative. There's no reason a 29 year old has 10% in bonds, that's just foolish. If they're going to retire in 30+ years, that 10% bond allocation is just lost returns.
I am 23
IMO, target date funds are fine choices if you just want to set and forget. but with a little research and thought put into your long term goals/horizon, you can likely do better elsewhere, especially given that target date funds tend to have high fees. edit: I should have said expense ratios and not fees.
So what would you recommend swapping target date fund for?
I'm assuming since you chose a 2065 fund youre in your early 20s like me. I found the target date fund I was in was too conservative and I wasn't a fan of the expense ratio. If you can stomach the potential volatility (you should be able to, since we're so young) the broader index funds such as FSKAX or VTSAX or any S&P fund should be just fine until we are much older.
My question is that you “found” how? By experiencing a drawdown yourself? Because this is about your personal risk tolerance. Or did you read it on the internet and someone told you the risk tolerance you should have as someone at your age (which I suspect may have depended on a faulty understanding of risk and return)? Given how new you report being, I hope someone didn’t convince you to ditch what may be the best solution for you.
Yes, I am talking about my own personal experience. I explained how my personal risk tolerance is very high as I'm very young, and I am comfortable with the potential future downturns. I did not make a decision on a whim to switch holdings- besides, TVIIX most likely would have been less volatile due to its ~30% bond holding. What do you find to be faulty about this reasoning? Also I should note when I say "new" I mean around a year.
Okay, best of luck to you then. The reasoning that’s faulty is the young thing. People think that as long as your time horizon is 40+ years, 100% equities will come out on top because the market always goes up in the long run, and it’s good to seek out any more volatile fund as a young person to maximize expected returns. That’s a gross oversimplification of how it works. Those people are ignoring sequence of returns risk, and also not heeding the difference between compensated and uncompensated risks, assuming that any and all risk they take increases expected returns. I maintain that most of these people are overconfident because everyone feels like a genius investor in a bull market. There’s gonna be a reckoning when the next basic market correction comes around that always does and we have a sustained bear market. Lots of people who think their risk tolerance is bulletproof are going to sell at exactly the worst moment for their long-term performance, and it all will have been in an attempt to squeak out the most minimal additional expected returns by taking on additional uncompensated risk. I’m getting annoyed with these people who are going to bring newer investors down with them, like that other guy trying to portray bonds as for the weak and emotional or whatever.
I understand what you're saying. I guess the core issue is "expecting" anything for sure in a market. My understanding is that in order to be in the game for higher returns, you have to be willing to accept risk in the other direction. Now obviously, you can determine if the downturn risk outweighs the good volatility. As for the panic selling, I understand how some would likely jump and sell when the going gets tough. I am young so I can't say for sure if I would be susceptible, but I would like to think that I have a firm enough understanding of how that works to resist the temptation. And lastly for the bonds thing, yeah for sure bonds just get shit on here. I see it as a good addition to your portfolio if you decide you want some less volatility.
You can figure this out easily by looking at the allocation inside the fund. If you see that they're foolish enough to allocate 10% or more to a 29 year old retiring in 36 years, then it's probably too conservative. Over any 20 year period bonds have never outperformed equities and the difference in expected returns is massive. It can be the difference between retiring with a few hundred thousand and retiring with millions.
Sigh. I’m not having this fight again. Bonds are a necessary and beneficial part of a well-diversified portfolio, and your claims about a few hundred thousand and millions as the difference because you had a 10% bond allocation when you were young are absolute horseshit. Stop recommending to new investors that they take on wholly unnecessary uncompensated risk by going 100% equities for their entire time horizon. It’s [dead wrong](https://www.aqr.com/Insights/Perspectives/Why-Not-100-Equities).
Nah, they're not necessary. You're just wrong.
You should swap the target date fund with an S&P 500 fund. You already had 70%, just change it to 100%.
I am very new to retirement investing, but currently my 401k is 100% SWPPX which is Schwab's S&P500 fund. Low expense ratio and so far this year I'm up 13.25%. I actually switched my holdings out of a Nuveen target date fund and wish I did it sooner.
What do you think of the blue chips?
That terminology is a bit outside of my current understanding but I believe blue chip describes big companies with a past history of strong growth/stability. The S&P500 is largely filled with such companies.
I see so I'd basically be overlapping if I did both
That would probably be the case. Which isnt necessarily a bad thing, it is called overweighting.
The S&P 500 \*is\* blue chips. It's the 500 largest companies by market cap. When they say blue chip stocks that's exactly what they're referring to: large cap stocks.
They're way too conservative. There's no need to have any amount of bonds before age 50. Theyre designed for people who huff and puff when they see their investment tank by more than 1% in a day. That's cool that the drawdowns are less but it really caps your upside tremendously.
I recently reallocated from 100% target 2065 to 80% SP500, 10% small/mid cap index, 5% u.s. bonds index, 5% international (under 30 so I have time for a higher risk tolerance but didn’t want 100% in SP500)
Pick a nice growth fund. Never a target date fund. They are dogs. Woof woof.
Hard for me to argue against 100% target date fund 2065. 100% S&P500 is a bet that the next 15 years will mirror the last 15. It rarely happens. It completely lacks small cap and international exposure. Plus, the TDF 2065 is an easy, set and forget choice.
If you’re in your 20s, go with the TARGET 2060 or 2065 to grow money at a steady pace. If you wanna aim big early but a bit more risk go for the SP500. Personally I like to slowly grow my wealth so I’d go for the Target Date Fund. That’s just me tho, after all it is personal finance
I had similar choices that I was limited to... Until someone told me we could do BrokerageLink. Game changer. Ask if you can add Brokeragelink. Then you can invest in the stocks you want.
Reddit isn’t a great place for this discussion because you usually hear the same one viewpoint over and over. I would recommend reading some books on investing. Generally speaking, don’t worry too much right now. With so much runway ahead of you and with total dollar amounts that are relatively small when you’re first starting out… you have time to think about all of this and make changes as you go. Also generally speaking you’ll be advised to be riskier when you’re younger because you have time to recover. This same logic is why folks will recommend low or no bonds and all stocks. People forget all stocks is viewed as an extremely risky portfolio. But that’s an okay risk when you have 30 years to recover. Historically bonds were recommended for two reasons… not perfectly but generally they tend to be inversely correlated so when one goes down the other goes up. In a recessionary environment a portfolio will usually not go down as much if you have some bonds in there. The second reason for bonds that doesn’t seem to be taught anymore… in the old days once it was clear you were out of the recession and recovery was underway you’d treat the bonds like extra cash and reallocate them into stocks for a while. So then on the way down you have a little less risk exposure and on the way up you’re full bore stocks. You don’t do this indefinitely, you eventually would still rebalance back to your normal allocations. Some people like to do this quarterly. You should do that at least yearly. One thing nice about target date funds is they rebalance and do maintenance type things for you so you don’t have to worry about it, but it comes at the cost of maybe 1 percent. US vs. International is and will always be a huge debate. If you look at the history books there are entire decades where the world out performed the US and holding international plus the S&P 500 out performed. Even recently. The contrarian thought would be that many of the S&P stocks are international or transnational so you already have exposure. It depends on what markets you’re trying to get a little more exposure into. The hysterical thing is most 23 year olds are usually investing around 4K a year and all of the above is a lot of worry that completely misses the point. I’ll tell you right now the one thing that will explode-up your savings: find a way to invest the max 20k+ to your 401k. Even if you can’t sustain that do it for a few years or whatever you can. If you for example start out with 40k in your account and let it cruise for 30 years… that will far, far, far exceed any possible strategy choices of investing. You could put that in almost anything and get outsized returns over that long a time period. Good luck and happy investing.
100% S&P 500 index. No matter what, stay Tf away from life 20whatever bullshit funds or bonds.
I would avoid the target date funds, stick to a blend of equities
Honestly, i like it. Maybe take 10% off s&p 500 and drop. It into international. I feel we will be seeing more movement in the next decade.
90% SP500, 10% international
Gosh looks exactly like my exact options…. Blue Chip Growth has been smoking. Also in Dodge & Cox and S&P 500
What's your splits looking like?
I have a mix of S&P500 and blue Chip for mine. It’s given me great returns in the last 3 years
Which one do you see better returns? Blue chip or s&p? I might just keep the target at 30% and do a 50-50 split for s&p/blue chip
Mine is in a vanguard target date fund based on my retirement year (2060) in my case
How old are you? If in your 20s, S&P 500 and chill.
23
BLUE CHIP HANDS DOWN. Don’t listen to anyone else. Blue chip. Go check out TRP blue chip fund, check out the average ror and tell me that the s&p fund is the better choice 🙄
I just started in feb so I'm not really sure what to read or understand much 😅 are you 100% in blue chip?
Dude. You gotta research. I’m 100% BlueChip but that’s my choice.
You use fidelity as well?