Vanguard Target Retirement 2055 Fund
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Whats The Point Of The $3000 Minimum
Was the $3,000 minimum initially intended to discourage people from trying to pick a whole slew of different funds rather than a simple, 3-4 fund portfolio of diversified, low-cost index funds? If so, that seems like a non-issue in this case. Most investors interested in target retirement funds like the idea of investing in just one fund thats the whole point.
Or, perhaps, does the $3,000 minimum exist simply to ensure that Vanguard receives a certain level of revenue per new investor?
How Vanguard Target Date Retirement Funds Work
Vanguard Target Retirement Funds, a Target Date asset allocation option, are designed to take you through retirement.
The asset mix of each Portfolio is based on a target date. This is the expected year in which participants in a Portfolio plan to retire and no longer make contributions. A team of asset allocation professionals adjusts each Portfolios make-up over time to ensure a noticeable and steady shift from equities to fixed income in the years leading to retirement.
The Vanguard Target Retirement Funds are composed of passively managed funds and are managed to help retain your potential for growth, and aim to preserve the value of your assets at and after retirement.
As each Portfolio glides over time, its asset mix is adjusted. Looking at the image below:
- Designed to take you through retirement.
- Glidepath is designed to continue to generate income in the years after the retirement date.
- The most conservative point on the glide path occurs 7 years after the retirement date.
- Underlying portfolio is comprised of 100% index funds.
- Vanguards embedded diversification approach provides balance against the natural ups and downs in the market.
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Why Is This Fund On Our Foundation Fundlist
|Total Ongoing Charges Please note that whilst we endeavour to show all charges associated with specific funds, sometimes this is not possible due to the information not being made available by the fund provider. In such cases transaction or incidental cost information may be missing.||0.2797%|
|Our Platform Charge We charge a platform fee starting at 0.35% for the first £250,000 of assets. Our charges for assets above £250,000 are shown on our rates and charges sheet||0.35%|
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Vanguard Target Retirement 205: Why The Minimum Initial Investment
Vanguard recently released a new mutual fund: Vanguard Target Retirement 2055. As you might imagine, its basically the same as their existing 2050 fund, but with each of the asset allocation changes scheduled to occur five years further into the future.
For the most part, I like Vanguards target retirement funds. But Ive got one big question, especially regarding this new one: Why not get rid of the $3,000 minimum investment?
If youre not planning on retiring until 45 years from now, youre obviously quite young. In fact, theres a very good chance youre still in school.
Its been a few years since I was in school, but I suspect that one aspect of college hasnt changed: Most college students dont have $3,000 sitting around.
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Which Target Retirement Fund Fits Your Timeline
Use our table to find the fund that best fits you.
*Vanguard Target Retirement Funds average expense ratio: 0.11%. Industry average expense ratio for comparable target-date funds: 0.49%. All averages are asset-weighted. Industry averages exclude Vanguard. Sources: Vanguard and Morningstar, Inc., as of December 31, 2021.
Investments in Target Retirement Funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in a Target Retirement Fund is not guaranteed at any time, including on or after the target date.
These fund suggestions are based on an estimated retirement age of approximately 65. Should you choose to retire significantly earlier or later, you may want to consider a fund with an asset allocation more appropriate to your particular situation.
All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss. Investments in bonds are subject to interest rate, credit, and inflation risk.
Cost And Charges Information
This calculator provides you with costs and charges information regarding our charges and, where relevant, the costs within this investment product
These are the annual costs based on an initial investment amount of over 1 year assuming a net zero growth rate
| Our annual fee
Our annual fee
Includes our platform fee at 0.35% per annum for Funds and Stocks & Shares , plus SIPP administration fee – see here
| Dealing charges
Any one-off commission charges associated with investing. Note that government taxes and levies are not included
| Product provider costs
Product provider costs
Product provider costs shown are inclusive of the fund ongoing charges figure , transaction costs and incidental costs
|Costs per annum displayed in monetary value|
|Total Costs per annum displayed as a percentage of investment value|
Cumulative effect of charges on your investment’s return
This illustration assumes that costs occur evenly throughout the year, charges are paid out of the investment evenly throughout the year, and that an annual growth rate of applies evenly throughout the year, before any charges including product charges
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Would You Pay $475 For A New Client
Vanguard Target Retirement 2055 has an expense ratio of 0.19%. That means that an investor with $3,000 in the fund would provide Vanguard with $5.70 in annual revenue. If Vanguard were to cut the minimum investment down to, say, $500, the revenue per new investor would decline by $4.75. And in the process, theyd become accessible to many more student-investors.
Yes, Vanguard would almost certainly be losing money on each investor who only invested $500, as there would still be administrative expenses associated with their accounts.
But Vanguard would have a new customer one interested in hands-off, index investing. And, in just a few years, that investor will likely be out in the workforce. Shell have more money to invest. And shell already have an account with Vanguard.
I could be wrong, but Id suspect that Vanguards current marketing strategy results in an average cost of far more than $4.75 per new client.
I like Vanguard a lot. Most of our own retirement savings are invested through them. But with that $3,000 minimum, Vanguard seems to be saying that theyre not particularly interested in having the business of young investors. Instead, when I get emails from college-age investors, I typically recommend Schwab because of their no-commission, low-cost ETFs.
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