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Target Funds
Old 05-22-2007, 10:17 PM   #1
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Target Funds

I was looking at the Target Funds my retirement plan offers. I find that all the allocations are to Funds of Funds. The Funds of Funds claim to match things like the S&P500 index but they are invested in managed funds.

Of course, I had to look at the fees.

Target fund .57%
Fund of funds .44%
Actual Fund 1.5% more or less
=======
Total 2.5%

As mentioned elsewhere, quite a chunk for someone not taking the time to learn how things work, if you were taking out 4%, you would have to set aside another 2.5% to cover that.

I opted for, as the FA giving the class said, the sophisticated self managed borkerage account with the .37% fee S&P 500 index. I even convinced one of my cow-orkers to do the same.
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Old 05-23-2007, 10:56 AM   #2
 
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Vanguard target funds have ERs of 20 or 21 cents.
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Can Be A Money Trap
Old 05-23-2007, 12:32 PM   #3
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Can Be A Money Trap

Target Funds are usually designed to be low cost (like the Govt TSP program) Vanguard & Fidelity and others have some good offerings. But it does not stop others and some retirement plans from wrapping fees around these funds. What other choices do you have? My wife's 403b offerings were terrible. Pick the best fund in the 401k that suits your overall portfolio asset allocation. I certainly like target funds but you still have to do your homework to make sure they are right for you.
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