Do target retirement date funds, offering glidepaths that shift asset allocations away from equities and toward bonds as target dates approach, safely generate attractive returns? To investigate, we consider seven such mutual funds offered by Vanguard, as follows:
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- Vanguard Target Retirement 2020 Fund (VTWNX)
- Vanguard Target Retirement 2025 Fund (VTTVX)
- Vanguard Target Retirement 2030 Fund (VTHRX)
- Vanguard Target Retirement 2035 Fund (VTTHX)
- Vanguard Target Retirement 2040 Fund (VFORX)
- Vanguard Target Retirement 2045 Fund (VTIVX)
- Vanguard Target Retirement 2050 Fund (VFIFX)
We consider as benchmarks SPDR S&P 500 ETF Trust (SPY), iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and both 80-20 and 60-40 monthly rebalanced SPY-LQD combinations. We look at monthly and annual return statistics, including compound annual growth rate (CAGR) and maximum drawdown (MaxDD). Using monthly total returns for SPY, LQD, three target retirement date funds since October 2003 and four target retirement date funds since June 2006 (limited by Vanguard inception dates), all through September 2025, we find that:
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