Vanguard Target Date Funds (video)
Summary of video: Vanguard Target Retirement Funds Three key points make Vanguard’s Target Date Funds stand out from the competition: a very basic, fundamental structure comprised of index funds in this fund-of-funds, without any additional management fee glide path continues through retirement date The low costs are a standard to compare other products against: Vanguard average expense ratio: 0.20% Industry average expense ratio: 1.12% Transcript of Vanguard Target Date Funds Paul: Hi, there, and welcome to Target Date Now. I’m Paul Manion. On today’s episode, I want to address a question we got from a viewer asking about how Vanguard target date investments stand out from the competition. As you may know, target date investments offer a diversified portfolio that will automatically rebalance to become more conservative as an investors gets closer to retirement. That’s the short story. The long story is that not all target date investments are the same, and here at Vanguard, we manage our target date investments according to some very specific principles. To explain what makes our investments unique, I’m pleased to be joined by John Ameriks of Vanguard’s Investment Counseling & Research Group. Welcome back, John. John: It’s nice to be here again, Paul. Thanks. How do Vanguard target date investments compare with their competition? Paul: What do you think, John? What differentiates our target date investments from the rest of the pack? John: I’d say it really comes down to three things. One of those is that we’re using a very basic, fundamental structure for the funds. Makes them a little easier to understand for people. The other thing is the focus on indexing in the portfolios. I would also say one of the things I talked about the last time I was here, that we’re investing the funds through retirement. Our glide path involves a through approach rather than a to approach. Why use index funds in Vanguard’s target retirement funds? Paul: Okay, so those three key things. Let’s talk about the underlying funds for a moment. Why use index funds? John: There are a lot of benefits with index funds. Of course, the big one and what Vanguard’s all about is cost. An indexing fund because of the way that it’s managed, its ability to track a benchmark and buy and hold, tends to have lower cost than other types of funds. I’d also say that that approach has some benefits in terms of the risks. The manager has a very clear benchmark. It’s very predictable in terms of what they need to invest and when, and so it does keep things a little more certain for the investors in terms of what their exposures are. Then lastly, I’d say, indexes are by their very nature very broadly diversified. These market cap indexes have exposure in all segments of the market and that, we think, is a really good thing from an investment point of view as well. Paul: Talk to me a little bit about why it’s important to be […]
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