Vanguard retirement funds were developed because the company understood that many investors needed a retirement fund that was simple and easy to understand and manage, as well as, it was balanced in a smart way that would meet their retirement goals. Yes, Vanguard began a method of investment for those planning on retirement in a certain number of years referred to as “Target-Date Fund".
Vanguard understood that when it comes to retirement investments, the further away from retirement you are the bigger risks you can take, since you will have more time to make up any losses that may unexpectedly occur. Let’s say as an example, what happened to the markets in 2008, where the bottom dropped out. Of course, since then the markets have more than recovered from the losses seen then. However, if you were getting to retire in 2009, you would have seen your retirement savings drained in a way that may have prevented you from leaving work.
Therefore, they have created the “Target-Date Funds” so that those close can choose to have their monies placed in safer investments, while those having a retirement date, decades away, may choose some riskier ones. Of course, if we could predict the future there wouldn’t be this need for different choices. We would all simply choose the Vanguard retirement funds that would perform the very best. But we can’t predict the future with any certainty, so we must weigh our willingness to risk are monies.
The good news is that Vanguards Target-Date Funds have a very low expense ratio of only around 0.12%, which compared to the industry where the average comes in at around 0.63%. These averages are all asset weighted. In addition, the industry average does not include Vanguard Retirement Target-Date Funds. Don’t make your decision on how much something costs either. As an example, if it costs a lot less and you make a lot less money, then it doesn’t matter what the cost was. Please also keep in mind that no one can guarantee how well, or bad, any investment will be.
I have always been a strong believer that the best way to predict the future is to study the past. If something has not done well in the past, what would lead one to believe that they will do good in the future. Of course, this is not always a true statement, but one must understand that it is a good indicator. The same can be true of something that did well in the past, may not do well in the future. That is why we must do our homework and study how are retirement monies will be invested. Don’t take my word, or anyone else’s before making your choice on whether to choose Vanguards Retirement Funds or let’s say, Fidelity's Retirement Funds. Do your own homework.
If you’re not sure what you should do, the Target-Date Funds, whether Vanguard or someone else’s are a good choice to make. You work very hard for your money and although retirement may seem like a long-ways away, it isn’t. Therefore, make sure you choose wisely, but make sure you choose someplace to start investing for your retirement.
Thank you and may God bless you!