[Diane]

My daughter was automatically invested in a target fund at work. She is 28 years old. I recommended she pull out of that and put her money in the S&P 500 fund.

Assuming it will be years and years before she needs it. Still the best advice?

Thanks in advance!

[Cody]

Probably good advice to invest in 100% stock for long-term growth (money not needed for decades).

That said, 100% in the S&P 500 fund may not be diversified enough – depending on who you ask.

[Brendan]

Assuming since it’s through her work it’s a 401(k)? Fidelity et al have high fees on those and count on investors not knowing better.

I wasted years of income trusting them.
Have her look for something akin to the VTSAX/VTI equivalent in the available options.

[Benjamin]

Another option would be to pick a target date fund that is for way later than when she’ll actually retire.

[Michelle]

Ok…not to hijack this thread but if the fee is low (.03 or something) would it ever make sense to pick a target date fund with a year that is maybe 10 years farther out?

so the glidepath is more aggressive as it might be appropriate for a younger person?

[Bill]

Agree. The target date funds are way too conservative, especially for someone in their 20s.

[Jack]

Yes. That’s a good choice. Most plans have a low cost S&P 500 fund and if she’s 28 she has several decades of compounding.

Even if we have a lost decade in the near future, that’s the best time for a young investor to be accumulating.

Keep it simple and cheap.

[Will]

I think having a substantial allocation to international stocks is important.

Also, small cap in the US and internationally

[Johnathan]

It’s ok advice. Personally I prefer having more than just US Large Caps though.

I like having US small & mid caps, international & emerging markets as well.

[Rick]

I really like young workers to choose 2-3 funds. With some difference to them, so not two large growth funds.

I believe they need and will benefit greatly by seeing how they act different over time in different market environments.

And it’s a great time to learn when the % change is always the same but the $ change is low.

So, look at the find options and if there are good fund (usually low cost index funds are a good start) for value or small cap or international or REITs, they may make good additional fund choices.

A sector specific fund could also do this but I personally feel that is likely to teach bad habits so I usually avoid them especially with young workers.

[Karl]

Look at the expense ratios and you’ll see the answer. In investing, you get what you don’t pay for.

Good move, mom!

[Dwayne]

The target date funds have about 90% in stocks for someone that age. You can look up the glide path and you will see they don’t start to really change until about age 50.

Each company has a different glide path so it is best to look up the specific one she has.

The bigger issue is to see what the fees are.

[Joel]

To be clear, there isn’t one right answer — none of us really knows how the market is going to move.

The MORE important issue is to keep up (and increase) your savings and invest in a reasonable fashion.

Most TDF will be fine for that ….
That said, 100% Equities is also a reasonable suggestion BUT I would encourage her to own both US and International Stocks.

Perhaps 75% Total US Market, 25% Total International.

[Dara]

In their Roth’s my kids are 50/50 target date and VGT.
VGT has kicked butt of course but I figure the target date is an easy set it and forget it as a backup and ballast during rocky times.

In their brokerage/ 401ks large cap growth and s and p.

fidelity blue chip has been an exceptional performer over the years outperforming any 500 options.

[Mark]

Depends. What date is TDF, Look at fees, returns. I’d would go 100% s and p for long term

[Tamara]

I am one of those to say , yes indexes if can – do a large cap us, an international, and a small cap (or following russell if need be).

[Kenny]

S&P500 or total stock market fund would be a good place to go when you’re first starting out.

Many places don’t have a total stock fund market fund available in their 401k so I’d say start with S&P500 if that’s the case.

[Author]

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