Quoted from rai:
You are making a common mistake, looking at returns ‘after the fact’ and decide what’s better. Not knowing what will happen going forward.
Also cardinal sin of comparing two different classes of funds against each other.
You are likely aware but I’m pointing out Target date fund does not compare to pure stock fund.
If you say (as you did) it’s returns (especially compared to target date fund). You are saying it’s better than TD fund. And you are using past results to do so.
TD is a mix of stocks (US and internationals) and bonds.
These three classes don’t corrilate with each and lately US stocks returned more than either other class.
People (some) like to own non correlating assets like stocks *and* bonds * and* international stocks.
This is not to gain the biggest one year number return but to have a few eggs in different baskets.
When 2008 happened this is what stock v bond return looks like.
And all stock chart 47% decline peak to low. The above shows total returns for the year was less loss because had some gains to erase first. But it’s no fun looking at 47% loss especially if you have large investment at stake.
Bonds aren’t sexy or make great returns but can help cushion a huge stock market correction and can be used to rebalance (buy more stocks when they are on sale after a crash).
I don’t favor a Target Date fund but prefer separate stock and bond funds with some international stocks as well.
I enjoy learning from my fellow pinsider stock market traders, in this unusual thread. Here’s a question for the financial gurus on this thread, which addresses the notion that it’s foolish to attempt to invest based upon short-term timing of market trends:
I know this pinball enthusiast quite well who is wholly unsophisticated with financial markets. Because he’s 59 years old, his retirement fund portfolios were, until very recently, in moderate risk investments in the aggregate. In the last few months, he has moved his entire portfolio into very low risk investments. He did so because of bearish concerns in the near offing, specifically, the scenario as follows:
1) special counsel, Robert Mueller, releases a report or takes other action prior to Labor Day 2018. The timing is intentional. Mr. Mueller wants to avert the criticism of releasing explosive information on the eve of the midterm elections. Also, his survival as special counsel is dubious after the midterms, with the ever-increasing threats to fire U.S. Deputy Attorney General Rod Rosenstein and other threats by POTUS and GOP legislators against ancillary persons associated with the Russian election interference investigation;
2) the Mueller report creates uncertainty about whether POTUS will serve the remainder of his term and/or a Constitutional crisis arises therefrom;
3) markets plunge in reaction to that uncertainty, as they did in December 2017 (Dow Jones industrial average dropping 350 points) when journalist, Brian Ross of ABC News, incorrectly implicated POTUS in reporting upon conversations with Michael Flynn involving Russia.
My pinball friend does not understand why “timing” of markets is generally regarded as a fool’s errand. Certainly, if he had a time machine enabling him to predict future events, he would buy low and sell high and take all measures timed to those key known events. Consequently, if he’s confident in the above scenario and its timing, his looking-glass serves as his personal time machine, for better or for worse. Naturally, his prediction of events and the markets’ reactions to those events could be entirely wrong. Nevertheless, if he’s comfortable with trying to time his investments to such events, what is the defect in his logic, apart from conventional wisdom that it’s very difficult to time such events?
My neophyte investment prognosticator, pinball friend relies on his acumen as a Constitutional scholar and a political junkie. He is certain that many others foresee this foreboding scenario and have likewise shifted their portfolios in advance of the anticipated plunge. This post is not meant, in any fashion, to be a political statement. Rather, this is a serious inquiry about how investors ought to view political events and their perceived dramatic effect on the financial markets. I (on behalf of my friend, of course) look forward to the words of wisdom to follow from the gurus.