Asked on 27 Oct 2019
Recently someone somewhere said a Target Date Index Fund is the better strategy of funds.
Is it even been offered here? What are our choices if it is? Need more details on this with SG context.
Hi Su! My friend Tat Tian recently shared the following article in another Seedly post on target-date funds in Singapore: https://www.todayonline.com/singapore/2050-retirement-money-pot-set-and-forget-target-funds-could-be-easy-option
The article gives a great overview of what target-date funds are, and the investing rationale behind them. Unfortunately, target-date funds don't seem to be generally available at the moment. Singaporeans can only buy such funds through investment plans offered by insurance firms. There's a lot to be said regarding the pros of target-date funds, based on what I've read. The best piece of information I've seen on the topic comes from the US-based finance blogger and investment manager, Ben Carlson: https://awealthofcommonsense.com/2019/06/david-swensen-a-targetdate-fund-walk-into-a-bar/
Carlson shared that in the 10 year period from mid-2008 through mid-2018, Yale's endowment fund, run by the legendary David Swensen, gained 7.4% per year. Over the same period, target-date mutual funds in the US (with an end date of 2035) from Vanguard, Fidelity, and T. Rowe Price returned 7.3%, 6.7%, and 8.0%, respectively. These three target-date mutual funds were the largest of their kind back then. Swensen's long-term track record is truly the stuff of legends, and he invests in a complex manner using hedge funds, private equity, venture capital funds, commodities, real estate, and so on. And yet, for a decade-long period, his performance has been on par with simple target-date mutual funds.
We create Target date custom portfolios for clients at Kristal.AI
There is a lot of research suggesting Target Date is a better strategy versus Balanced portfolios - and intuitively that's true as in early stages Target Date take more risk and reduce it over time via lower risk asset allocation during its life cycle.
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