Target funds vs index funds
My financial advisor told me Target funds are better than index funds for retirement, however this article makes a good case for index funds. What is everyone else here buying in their 401k? https://www.myroadtofire.com/blog/3-ways-to-maximize-your-401k-retirement-account
I have my money in index funds and manage it myself right now.
Target funds keep rebalancing in favor of safer options like bonds with time. The problem is that you have a small amount of your net worth in such funds so that level of complication doesn’t help much in the bigger picture. A simpler strategy is to just buy index funds and keep 100-<age> %age of your net worth in safe investments like bonds, savings etc over time.
This. The age keeps increasing with your situation in life.
You could look for target date index funds. Also, does your fin adviser work for a mutual fund company? If you are young and focused on accumulating assets, index funds are a perfectly fine way to go.
Target Funds have high expense ratios, no surprise
Target funds become less risky as you get closer to the retirement, index fund has same risk irrespective
Target funds have higher fees, that’s why “advisors” push them.
Historically mutual funds < index funds < etfs. Fidelity has changed all of that with index funds with $0 expenses FNILX aka a s&p 500 FZROX total stock market FZIPX mid and small cap FZILX international funds
Target funds are set and forget, index funds require more management on your part.
Most target funds are funds of funds - containing a shifting mix of... Index funds. Your financial advisor is either incompetent or lying to you if he didn't bring this up.
Ignore financial advisor and ask randos here . Great strategy ! More seriously , target funds are a mix of other index funds so you’ll be good
I may end up ignoring people here too :)
Lot of target funds will get you more or less the same (mix of equity index, international, bond index). You can allocate directly to index funds yourself but one benefit of target funds is they rebalance on your behalf depending on circumstances (not hard to do this yourself, of course). Another thing to check would be expense ratios for both scenarios - if target fund is too expense, you might be better off doing it yourself.