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No. of Recommendations: 2

You wrote, Just yesterday I was reviewing two different 2030 funds and their stock to bond ratio varied by over 10%. Their domestic vs international stock also varied significantly. Some target date funds are managed so that income would start on that date while others are managed with the idea that they will in fact be liquidated on that date - resulting in very different management styles.

Well... I think they all tend to do much the same thing. They set an allocation for when the fund opens and they set an allocation for the target date. Then every so often (monthly or whatever), they adjust the allocation on a prorata basis in an effort to gradually slide the allocation from more aggressive to less.

When you're comparing target date funds, part of the problem is that some funds will try to be more or less conservative than others. For instance, I have some of the Vanguard Target 2030 fund as a core investment. It's overly conservative to me and will have too large a bond allocation by 2030. But other funds aren't so conservative ... which explains your 10% spread.

For me, I'd look at two things. The first is obviously the expense ratio. Some funds are stupidly expensive, when there's really no excuse for it as a computer program could automate this strategy using the trading of ETFs or other open-ended funds. But this only tells you if you want to be in that fund or not.

The second is how conservative the fund will be at the target. You'll need to compensate if you think its being to aggressive or too conservative. You can compensate by buying some offsetting investments. Or you can buy a fund that has a longer (or shorter) target date.

With that said, I'd also say that I kind of agree with PBS - even though I've not seen or read what was said. Use of any volatile investment is probably inappropriate if you really need the funds in the near future. But if you're really going to need the funds in say 2030, it might be an appropriate way to go - even if the funds aren't for retirement.

- Joel
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