Hello, I wanted to see what others thought of the T. Rowe Price
RETIREMENT 2035 FUND? Do you think this fund is a good thing to have or
is there something better? The the managment fee is 0.86%, do you think
that is too high? How about replacing the fund with a mix of ETF's?
Thanks,
joe
wrote:
>
> Hello, I wanted to see what others thought of the T. Rowe Price
> RETIREMENT 2035 FUND? Do you think this fund is a good thing to have or
> is there something better? The the managment fee is 0.86%, do you think
> that is too high? How about replacing the fund with a mix of ETF's?
It is a good fund of funds; I like the fact that it keeps little in
bonds (for an target retirement 30 years away); other target 2035 funds
keep more in bonds. (You might compare with Fidelity Freedom Fund 2040
for a similar allocation.)
These target maturity funds work at two levels - asset allocation
(percentage in large caps, small caps, foreign, bonds, etc.) that is
gradually shifted over the years; and investment management within each
asset class (i.e. how the underlying funds are managed).
At the top level, you have a choice - you can do it yourself, or have
someone else do it (like Jerome Clark, the manager of the Price
Retirement 2035 fund). Price is not charging you for this service (you
are only paying for the underlying funds). One could, if so inclined,
decide on asset allocation oneself, or simply mimic what this or a
similarly targeted fund is doing. (The fact that the fund tells you a
few months after making changes doesn't matter here - you would be
following it for the purposes of allocating investments over 30 years,
not for selecting "hot funds".)
Doing it yourself is more work and doesn't save you money at the asset
allocation level. On the other hand, it does give you more control
(especially if there are other goals you have along the way that you
want to consider), and allows you to substitute different underlying
investments (which can save you money). Such as substituting ETFs for
actively managed funds, if you want that approach.
At the lower level - selecting the underlying investments - there's more
to consider. T. Rowe Price has fine, relatively inexpensive, actively
managed funds. Fidelity clutters up its Freedom 2035 fund with too many
funds (and leans even more heavily towards large caps). Vanguard, in
contrast, uses index funds exclusively (just four - Total Stock, Total
Bond, European, and Pacific), giving a lower underlying average expense
ratio (0.21%), but with less coverage - missing emerging markets, high
yield, etc.
If you like index funds, then you might want to use ETFs, or just use
Vanguard's fund (which won't cost much more, will save you broker fees
and the hassle of managing the asset allocation yourself). If you use
ETFs, you'll have the same problem as Vanguard with bonds - there are
only six bond ETFs, all domestic high grade, no junk.
For a portfolio of actively managed funds, I think the Price fund is
fine. Not perfect - for example, since Price has no vanilla Mid Cap
fund*, it uses both Mid Cap Growth and Mid Cap Value (both good funds)
instead. But the Price Retirement fund is good choice, and a way to get
access to some of Price's good closed funds (ironically, like their Mid
Cap funds).
*The closest Price has to a vanilla midcap is an extended market index
fund, not a pure mid cap index.
--
Mark Freeland
Since it's a fund of funds, the actual management fee will be more than
0.86%, it might go over 1.00%. The fund might have distributions every
year due to the reallocation of its holdings.
There is a good topic about investing in ETFs...
"Tim" <> wrote in message
news:
> Since it's a fund of funds, the actual management fee will be more than
> 0.86%, it might go over 1.00%.
T. Rowe Price's funds of funds (Retirement 20xx, Spectrum family),
Vanguard's (LifeStrategy family, Target Retirement 20xx, STAR, Developed
Markets Index Fund, Total International Stock Index), and Fidelity's Freedom
fund family charge 0.00% for the fund of funds management. The 0.86% you
see is the total imputed expense ratio of the fund.
Most funds of funds do charge separate management fees - for example,.
Fidelity's Four-In-One fund charges 0.10% (currently under a voluntary limit
of 0.08%), all the way to the FundX Upgrader family charging 1.3-1.5%, and
beyond. But not this fund, or similar funds from Fidelity and Vanguard.
..
> The fund might have distributions every
> year due to the reallocation of its holdings.
>
> There is a good topic about investing in ETFs...
Realizing gains due to reallocation is a comment about using a lifecycle
strategy - whether you use a fund like Price Retirement 2035, or do it
yourself (with ETFs or other securities) doesn't particularly matter.
Annual turnover due to reallocation is small in any case - the Price fund
has a 7% turnover from reallocation. Or if you prefer using index funds,
Vanguard's Target Retirement 2035 has a 2% turnover.
--
Mark Freeland
Thanks everyone for your comments, I really appreciate the time you
took to respond. I've been thinking about Vanguards 2035 fund which has
a lower expense ratio, but Tim has a good point about Price's blend of
funds. I might just decide to stay with Price.
Thanks again,
joe
<> wrote in message
news:
> Thanks everyone for your comments, I really appreciate the time you
> took to respond. I've been thinking about Vanguards 2035 fund which has
> a lower expense ratio, but Tim has a good point about Price's blend of
> funds. I might just decide to stay with Price.
>
> Thanks again,
>
> joe
Tim typed 40+ words, as opposed to Mark's hundreds and hundreds
of words containing sound advice backed with verifiable facts, yet
you direct thanks to Tim?
Some people, I tell you ..... Hmmmmmmm.
You are absolutely right I apologize. Mark thank you so much for your
time in taking to respond to my question. You have definitely given me
a lot to consider.
Thanks again,
joe
Gary C wrote:
> <> wrote in message
> news:
> > Thanks everyone for your comments, I really appreciate the time you
> > took to respond. I've been thinking about Vanguards 2035 fund which
has
> > a lower expense ratio, but Tim has a good point about Price's blend
of
> > funds. I might just decide to stay with Price.
> >
> > Thanks again,
> >
> > joe
>
> Tim typed 40+ words, as opposed to Mark's hundreds and hundreds
> of words containing sound advice backed with verifiable facts, yet
> you direct thanks to Tim?
>
> Some people, I tell you ..... Hmmmmmmm.
Glad to know that I am wrong about the management fee. I should read
its prospectus carefully.
"Under the Investment Management Agreements with the Retirement Funds,
and
the Special Servicing Agreements, T. Rowe Price has agreed to bear any
expenses
of the funds which exceed the estimated savings to each of the
underlying funds.
Thus, the funds will operate at a zero expense ratio."
- T. ROWE PRICE Retirement
Funds
.... but the dubious thing is who pays TRP the exceeded amount...