Target Retirement Funds

I recently read a CNN Money Article talking about the 70 Best Mutual Funds. Vanguard reins across the board with regards expense ratios and returns. This article was a critical step in me moving my individual accounts from Schwab to Vanguard, where my employer retirement account already resides.

Without digging in too deeply to all the areas mentioned (Active Funds, Index Funds, ETFs, Target Retirement Funds), I'm going to focus on the Target Retirement Funds. I think that Target Retirement Funds are an exceptional option for those who are new to investing. They're a simple way to get on the right track with retirement, and require no balancing effort on your part.

These types of funds are special because they're an all-in-one balanced package, that will readjust with you (automatically) with every stage of retirement. When you're young, the fund is aggressive, and mostly allocated to the stock market. Around the time you turn 30, most target funds will begin to shift towards a larger bond load. This trend will continue into your 40's and so on, until you're retired, at which point you're almost entirely bonds and cash. Your money remains protected from risk at a time when you'll need to begin withdrawing.



Which Target Retirement Fund is right for you?

VFIFX - Vanguard Target Retirement 2050 has a .21% Expense Ratio, and the best returns of any funds listed here - granted we're looking at a very short history. $3000 Investment Minimum. No Load, No Fee.

SWERX - Schwab Target 2040 Fund has a .94% Expense Ratio, and a $100 Investment Minimum - a highly redeeming quality. No Load, No Fee.

TRRKX - T. Rowe Price 2045 has a .76% Expense Ratio, and a $1,000 Minimum to open an account, with a $50 investment minimum in this fund. No Load, No Fee.

I like Vanguard's the best - The expense ratio is very important, as it's the only annual price you pay for being in the fund. If you can't afford the $3000 Vanguard Minimum, go for Schwab's $100 entry fee (lowered from $500 earlier this year). Schwab is also very customer friendly and hands on. I had a good experience with them.