Vanguard Targets Youngest Millennials

Vanguard Targets Youngest Millennials

January 19, 2022

Vanguard Targets Youngest Millennials

Vanguard is launching two new offerings aimed at investors just entering the workforce: The Vanguard Target Retirement 2070 Fund and Vanguard Target Retirement 2070 Trusts.

The funds, which will be available in April, will initially be invested 90% in stocks and 10% in bonds. If investors stick with either fund over the next several decades, the fund’s “glide path” gradually reduces the allocation to equities, winding up with 30% of its funds invested in stocks and 70% in bonds seven years after retirement. It will have an expense ratio of 15 basis points or less as well as a $1,000 minimum buy-in, and it will likely remain open until 2077. There are no redemption fees.

Target date funds have become increasingly popular in recent years, with nearly every retirement plan offering them (95% of Vanguard’s own defined contribution plans include one). Over the past decade, the percentage of all Vanguard participant contributions directed at target dates has risen from 27% to 60%, and 54% of plan participants invest solely in a single target date fund.

But Vanguard is redoubling its commitment to target dates at a time when demographic trends may be working against them. A new study from the National Bureau of Economic Research highlighted by The Wall Street Journal has found that the typical target date fund glide path gets too conservative too quickly. While many target date funds reduce their exposure to stocks to just 50% by retirement age, and to as low as 30% during retirement, the researchers’ model recommended an equity exposure above 60% even in early retirement. That’s partly because longer lifespans and a decade of low interest rates may mean that many people need to keep building their nest eggs past the age of 65. (Investing in the 2070 fund is also, in its way, a bet on Vanguard’s own longevity: The 2070 fund is aimed at people planning to retire in nearly 50 years; Vanguard itself, founded in 1975, is only 47.)

We’re glad The Journal is coming around to our point of view. We’ve long believed that investors’ individual financial needs, resources and risk tolerance should be what guides their investment strategy—not their birthday.

Webinar: What Made 2021 an Outlier for Investors? Here’s Our Team’s Take

It was a record-setting year for the stock market, but diversified investors may have felt left behind. Our experts will explain why we think 2021 was an outlier and what 2022 has in store—including what we’re doing to prepare for greater market volatility.

Join us on Wednesday, Jan. 26, from 4:30 p.m. to 5:30 p.m. EST for our next quarterly webinar, Diversification Is Dead…and Other Modern Market Myths, to learn why our investment strategists think volatility is here to stay even as the economy continues to recover. Chairman Dan Wiener, Director of Research Jeff DeMaso and Chief Investment Officer Jim Lowell, among others, will discuss the current market environment and their outlook for the months ahead. In addition to a market recap and commentary, this interactive webinar will allow our team to answer your questions and discuss your concerns.

In brief, improving economic fundamentals should provide a solid foundation for further stock market gains, but inflation has become a bigger concern for investors. Rising interest rates, difficult comparisons to prior-year corporate earnings, the future of stimulus spending and higher consumer prices will all come into play in what may be a bumpier year for the markets. As always, we’re eager to share our thinking with you. Click here to register now!

Chart of the Week: Supply Chain Pressure Eases…Slightly

We monitor a wide range of data to form our outlook on the market and the broader economy—every other week, we’ll spotlight one indicator our analysts have found informative.

Supply chain
Note: Chart shows monthly deviation from normal index level from December 1997 through December 2021 for the Global Supply Chain Pressure Index. Source: Federal Reserve Bank of New York.

Director of Research Jeff DeMaso By Director of Research Jeff DeMaso

If you really squint, you can see it: According to a new index constructed by the Federal Reserve Bank of New York, global supply chains started easing in November. The trend continued in December despite the omicron wave of COVID-19. You can find other signs of easing supply chain and inflationary pressures in the ISM manufacturing report from last week as well as in falling producer prices in China. Supply chains won’t stay as kinked as they’ve been; it just takes time for suppliers to come back online to meet demand.

Podcast: 2022 Trends We’re Watching

Investors are entering 2022 haunted by many of the same headline risks that dominated 2021—including another rising wave of COVID-19 infections impacting the economy. But, as Chairman Dan Wiener and Chief Investment Officer Jim Lowell explain in this episode of The Adviser You Can Talk To Podcast, this year looks to be very different than the last. Dan and Jim discuss the key trends and indicators we’re watching, including:

  • The Fed’s three weapons against inflation
  • Whether wild swings in sentiment will rock markets again this year
  • Why there are still bargains to be found in stocks despite the headlines

Dan and Jim give their thoughts on why we still believe in bonds, and they describe our overall approach to diversification in what we think is likely to be an even more volatile 2022. Click here to listen now!

Adviser Investments’ Today’s Market Takeaways

There’s no shortage of hyperbolic headlines and provocative punditry in the financial media. But you won’t find such hysterics here. In Today’s Market Takeaways, members of our investment team provide timely videos that clearly and concisely explain what we’re seeing in the markets.

In this week’s Market Takeaways, Vice President Steve Johnson looked at whether growth stocks will regain their lost luster, while Senior Research Analyst Liz Laprade revealed how rising rates are a mixed blessing for bank stocks.

We hope you find these episodes engaging and accessible. If there are any topics you’d like us to address, please send an email to info@adviserinvestments.com!

About Adviser Investments

Adviser is a full-service wealth management firm, offering investment managementfinancial and tax planningmanaged individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trusts, institutions and foundations since 1994. Adviser Investments and its subsidiaries have over 5,000 clients across the country and over $8 billion in assets under management. Our portfolios encompass actively managed funds, ETFs, socially responsible investments and tactical asset allocation strategies, and we’re experts on Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868.


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