Balanced Funds vs Target Date Retirement Funds [Retire on Autopilot?]

Which strategy is better for retirement on autopilot? We take a look at the impact on retirement planning when using balanced funds vs target date retirement funds.

#BalancedFund #TargetDateRetirement #LifeStrategy

Follow up Videos:

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-- Outline
00:00 Intro
Target-Date Retirement Funds and Balanced Funds use different investment strategies, that differ primarily in their risk exposure over time. In this video, we will look at an overview of these two strategies, go into more details on their risk exposure via stocks, and relate to considerations for designing our own investment portfolios.

00:39 Balanced Fund Strategy
A balanced fund simply maintains a fixed allocation to stocks and bonds with periodic rebalancing. There are a variety of such funds. I think the Vanguard LifeStrategy are some of the best in this category.

02:08 Target-Date Retirement Fund Strategy
A target-date retirement fund uses a dynamic asset allocation, starting with a very high allocation to stocks when you are young. Then, it gradually transitions to higher bond allocation as you approach and enter retirement. This is called a glide path. We look at the details of how Vanguards target-date retirement funds and their glide path.

04:05 Risk Exposures
These two strategies have different exposure to stocks over time, which is a primary risk in the portfolio. We look at a hypothectical investor and how this risk could manifest in their portfolio if they used a target-date retirement fund and balanced fund.

07:11 Portfolio Design
When we are designing our own portfolios and asset allocation strategy, we need to consider our personal risk tolerance and goals. Different strategies will fit one investor better than another. We can learn from the differences in risk exposure between target-date retirement vs balanced strategies. We could blend some of each, or we could even get creative and try other options. The key is to carefully consider these risk exposures and how they relate to your temperament for risk and your goals.

11:19 My Strategy
I share the strategy my wife and I are pursuing for financial indolence. This strategy is not for everyone, as it is specific to our goals and personalities.

12:44 Final Thoughts
I think target-date retirement funds and balanced funds, specifically LifeStrategy balanced funds, are great investment options. If you want more flexibility, I believe a three-fund portfolio is the best portfolio for most investor. It can be adapted to your specific needs, is lower cost, and allows for additional optimizations.

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Disclaimer: I am not a financial adviser. My videos are for educational purposes and are my opinions. There is no guarantee you will be successful following my opinions.

[nickdoyle-achievefinancial]

Thanks for watching everyone! Here are some follow-up videos:

[BB-cskk]

A barbell strategy including 5-8 years treasury funds in short, intermediate, short term tips and 70% stocks would let me sleep well through bear markets. See John Clements blogs as he uses VT for stocks. Vanguard Wellington 2/3 stock or Wellesley 1/3 stock have also had a very long track of outstanding performance

[Constitution]

Hearing this makes gold sound like a more reliable way of preserving one's wealth while still getting a modest growth increase. Historically speaking, gold has never experienced a fifty percent drop like stock and bond markets.

[julhe]

Thank you, always good information!!!

[Guest-dlvw]

Great video Nick; thanks so much. I agree that the probable best way to go is a three-fund portfolio. It takes a little more effort but should result in a higher rate of return over the years. I'd probably go Vanguard's VTSAX (for US Stocks); VBTLX (Or maybe VSCSX in an interest rate increasing market) and Vanguard's Total International Stock Market Index Fund (VTIAX, I believe is the Ticker). Alternatively, do you have any feelings Re: the following traditional Balanced Funds: VWENX, VWIAX, FBALX, FPURX, DODBX, and let's throw in Price's PRWCX. Oh, I suppose we could add Oakmark's OAKBX, but I think overall the choice is between VWENX and FBALX (or Fidelity's FPURX). In a traditional balanced fund I think I'd probably convert over from VWENX or FBALX to Vanguard's VWIAX when one attains age of 65 or so!
Again, great video Nick; thanks so much.

[autobotdiva]

i think i like the lifestrategy fund better than the target date

[franklinsmith]

What do you think of a 3 bucket strategy in retirement?

[browniestv]

Great Video Nick, 🔥 would you prefer 3 Fund Portfolio or a Target Date Fund? Thanks!

[VTmyETLaTesla]

Balanced Fund? Target Retirement Fund? Pfffft. I'm 100% Tesla. Have fun being POOR while I collect my 10X Tendies going forward.