I currently have a Roth IRA with 10k invested in the Vanguard Target Retirement Fund 2050 (VFIFX). The Target Retirement Fund consists of the following:
- 63.0% - Vanguard Total Stock Market Index Fund Investor Shares
- 26.8% - Vanguard Total International Stock Index Fund Investor Shares
- 8.1% - Vanguard Total Bond Market II Index Fund Investor Shares
- 2.1% - Vanguard Total International Bond Index Fund
with an expense ratio of 0.18%.
I'm thinking of "trading" my VFIFX for a similar distribution, with a twist:
- 65% - Vanguard Total Stock Market ETF (VTI) - ER .05%
- 15% - Vanguard Total Intl Stock ETF (VXUS) - ER .14%
- 10% - Vanguard REIT ETF (VNQ) - ER .10%
- 08% - Vanguard Total Bond Market ETF (BND) - ER .08%
- 02% - Vanguard Total International Bond ETF (BNDX) - ER 0.20%
with an expensive ratio of .65 * .0005 +.15 * .0014 + .10 * .0010 + .08 * .0008 + .02 * .0020 = .07%
I'd like to diversify my portfolio with the addition of the REITs by substituting Intl. stocks. To make up for the low Intl. Stock percentage in my tax-advantaged account, I plan on boosting the percentage in my taxable brokerage account since they have tax benefits versus Bonds/REITS.
Advantages of this approach:
- Addition of REITs (diversification)
- Lower Expense Ratio
- More control
Disadvantages of this approach:
- Effort (minimal) to adjust the distributions as I age.
- No longer in an actively managed mutual fund.
Is this a bad idea, now? Is this a bad approach as I "age"? Should I just keep it simple and stick with the retirement fund? Is there an advantage to the Target Retirement Funds that I am missing?
Thanks in advance!