• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

RobBerger.com

Digital Marketing for the Professional Blogger

  • Join the Newsletter
  • Morningstar User’s Guide
  • Personal Capital Review and User’s Guide
  • 12 Personal Finance, Investing and Retirement Tools

Investing

7 Best Short-Term Investments to Save Money (2023)

August 1, 2022 by Rob Berger

Some of the links in this article may be affiliate links, meaning at no cost to you I earn a commission if you click through and make a purchase or open an account. I only recommend products or services that I (1) believe in and (2) would recommend to my mom. Advertisers have had no control, influence, or input on this article, and they never will.

There are a lot of good reasons to hold cash. An emergency fund is a must. Then there’s saving for a home or vacation. Whatever the reason, the big question is where are the best short-term investments to park your money.

With the rise in inflation, savings rates have risen, too. Here are 7 of the top short-term investments for your money.

Best Short-Term Investments for Saving Cash

1. No-Penalty CD

This has been my choice lately. As the name suggests, a no-penalty CD doesn’t charge a penalty for early withdrawal. You get the higher yields of CDs with the flexibility to pull your money out at any time.

Typically you pay for this no-penalty feature with a slightly lower APY. Right now, however, Sallie Mae is offering a 14-month no-penalty CD that pays 4.40% APY. This offer is only available through a service called SaveBetter. It’s the best deal I’ve been able to find, and I’m moving my cash to this account now.

Featured Offer: Sallie Mae 14-Month No Penalty CD

Open an Account
  • 14-Month No-Penalty CD
  • APY: 4.40%
  • Min. Deposit: $1
  • No early withdrawal penalty
  • FDIC Insured

2. U.S. Government Treasury Bills

Treasury bills are U.S. government bonds that mature in one year or less. The government issues them in terms of 4, 8, 13, 26, and 52 weeks. They are zero coupon bonds. You buy them for less than face value, and receive the face value when the bond matures. The difference represents your interest.

You can buy Treasury bills via Treasury Direct, but I wouldn’t recommend it. The website is a mess. A better approach is to buy them through your broker of choice. Fidelity, Schwab and Vanguard are all reasonable options.

Current yields range from about 4% to nearly 5%. These yields change daily, so be sure to check out current yields here.

3. High-Yield Savings Account

For those who want a straight up savings account, there are several today that pay north of 2.00% APY. The highest APY I can find on a savings account available nationwide without savings caps is My Banking Direct (4.35% APY). Let me know if you find a better offer.

4. High-Yield Money Market Account

When it comes to saving cash, there really is no difference between an FDIC-insured savings account and an FDIC-insured money market account. Sometimes, however, you’ll find that one or the other pays a slightly better rate.

The best MMA rate I can find comes from the Redneck Bank (4.25%).

5. High-Yield Checking Account

If you want to keep your money in a checking account, there are some high-yield options. One of the best rates out there is from M1 Plus (3.30% APY). The rate applies to both the SoFi checking and savings account, but does require direct deposit to qualify.

6. Business Checking

Business

For small business owners and freelancers that have a business, Bluevine is an excellent choice. Bluevine is very similar other neobanks except it’s for small businesses. It pays 1.50% on balances up to $100,000. There is no interest earned on balances over 100,000.

7. Fitness Bank

Fitness Bank

The last one on our list is called Fitness Bank. They tie the interest rate you can earn by how many steps you walk each day. Seriously. They pay up to 4.10% APY. You have to average 12,500 steps a day to earn this rate and have both a checking and savings account (4.00% with just a savings account). If you get at least 10,000, you can earn up to 1.25%. Even if you sit in a barcalounger all day you’ll earn 0.50% APR

If you’re a senior citizen at least 65 years of age they cut you a break. You get the top rate at 10,000 steps. You do have to download their app and wear an approved fitness tracker, which include Garmin, Fitbit, Google Fit and Apple Health.

Bonus Tip

If you can wait at least 12 months before accessing the money, I Bonds are the best risk-adjusted return you can get today.

Filed Under: Investing

A List of Low Cost Financial Advisors (Say NO to 1% Advisors)

March 29, 2022 by Rob Berger

Some of the links in this article may be affiliate links, meaning at no cost to you I earn a commission if you click through and make a purchase or open an account. I only recommend products or services that I (1) believe in and (2) would recommend to my mom. Advertisers have had no control, influence, or input on this article, and they never will.

Investment advisors charging one percent of the investments they manage for you is the industry norm. Many charge more than that.

Not sure how fees may affect your wealth over time, then check out this report.

In an effort keep more of your money in your pocket, I’ve created this list of low cost financial advisors. It includes both flat-fee advisors as well as those who charge 50 basis points (1/2%) or less.

Please understand that I am not recommending these advisors. You’ll need to do your own due diligence to determine whether they are a good fit for your financial needs and goals.

Mark Zoril

Mark Zoril

Fees: $239 the first year, then $8/month
Services: Financial planning, investment management
Website: https://planvisionmn.com/


Rick Ferri

Rick Ferri

Fees: $450/hour
Services: Hourly advice for DIY investors
Website: https://rickferri.com/


Jack Zarinsky

Jack Zarinsky

Fees: Charges a one upfront flat fee and annual flat fee (details here)
Services: Financial planning, investment management and tax preparation
Website: https://mysafebridge.com/


Asset Builder

Fees: 0.35% (on average)
Services: Investment management using DFA funds
Website: https://assetbuilder.com/


Vanguard Advisor Services

Website
Fee: 0.30% ($50,000 minumum)
Services: Financial planning, investment management

Andrew Dressel, CFP®, APMA®, CRPC®

Abundo Wealth
Fee: $375-$450 start-up fee, then $89-$139/month
Services: Financial planning

Michael T. Powers, CPA, PFS, CFP®

Manuka Financial
Fee: $950 initial fee + an ongoing flat fee of $1,250 – $6,250 per quarter
Services: Retirement planning, investment management, tax preparation

Jon Luskin, CFP

Website
Fee: For a one-time financial review, you pay a one-time fee: $1,725. Additional in-depth work (many clients don’t need this) and returning clients are billed at $350 an hour.
Services: Hourly advice for DIY investors.

Lorne Abramson, CFA, CFP®, EA 

Website

Fee: Flat fee based on services provided
Services: Financial review, Comprehensive retirement plan, hourly consultation

Here’s a list of flat-fee planners put together by Cody Garrett, CFP.

Here’s a list of flat-fee and advisors put together by Sara Grillo.

If you know of other advisors who should make this list, please let me know.

Filed Under: Investing

3 Best Robo-Advisors in 2023 (Out of 23 Evaluated)

March 22, 2022 by Rob Berger

Some of the links in this article may be affiliate links, meaning at no cost to you I earn a commission if you click through and make a purchase or open an account. I only recommend products or services that I (1) believe in and (2) would recommend to my mom. Advertisers have had no control, influence, or input on this article, and they never will.

Robo-Advisors promise to make investing easy at a very low cost. Investors have taken notice. According to one estimate, automated investing platforms will manage nearly $1.5 trillion by 2023. With dozens of options, however, picking the best robo-advisor can be overwhelming.

To help, I examined about two dozen robos and narrowed them down to what I think are the top three choices. Note that I have used all three robo advisors that made this list. I continue to test other services and will update this list in the future.

Best Robo-Advisors
  1. Betterment–Best Overall Robo-Advisor
  2. M1 Finance–Best No-Fee Robo with Ultimate Flexibility
  3. Wealthfront

Betterment–Best Overall Robo-Advisor

I’ve helped family members and friends set up their first investment account. After explaining the pros and cons of traditional brokers and robo-advisors, they have all chosen Betterment. There are several reasons why Betterment is such a popular choice.

Ease of Use: With Betterment, you select your account type, answer a few questions about your goals, and fund your account (check or bank transfer). From there, Betterment does the rest. It invests your money in a several low cost ETFs that give you a diversified portfolio of stocks and bonds.

Betterment Investing Portfolios

In addition to the core portfolios above, it also offers several socially responsible investing portfolios.

Betterment Socially Responsibly Portfolios

Account Types: Betterment offers a wide range of account types, including:

  • Roth and Traditional IRA
  • SEP IRA (single participant only)
  • Inherited IRA
  • Individual taxable accounts
  • Joint taxable accounts with rights of survivorship
  • Trust accounts

Beyond investment accounts, it also offers deposit accounts:

  • Cash Reserve (a high-yield cash account)
  • Checking account provided by nbkc bank, Member FDIC.

Features: Apart from its easy of use, Betterment’s long list of features earn it the top spot as the best robo-advisor:

  • Rebalancing: Automatically rebalances your investment accounts.
  • Automated Investing: Set up recurring deposits to your account and automatically reinvest dividends and interest.
  • Tax Tools: Betterment offers several features to reduce your taxes, including tax loss harvesting, tax efficient rebalancing, and asset location.
  • Planning: Track any number of financial goals, including retirement or saving for a child’s education.
  • Financial Dashboard: See all of your finances in one place, including assets held at other financial institutions.
  • Advisor Help: Unlike most robo-advisors, Betterment has Certified Financial Planners available to help you.

Low Fees: Betterment offers three fee levels:

  • No Fee: You can open a no-fee checking account (comes with a free Visa debit card) or a Cash Reserve account.
  • 0.25%: Digital investing with no minimum balance (comes to about $2.50 a year for every $1,000 invested).
  • 0.40%: Premium investing that includes unlimited calls and emails with Betterment’s team of CFPs (requires a $100,000 minimum balance).

Finally, Betterment is ideal for every stage of an investor’s journey. It’s easy to open up your first account, with no minimum requirements. And betterment offers a wealth of tools for those entering retirement who need to start withdrawing money to live on.

Try Betterment

M1 Finance–Best No-Fee Robo with Ultimate Flexibility

For those that want the automation of a robo-advisor, no fees, and complete control of your investment strategy, M1 Finance is without question the top choice. It blends the benefits of traditional brokers with the automation of robo-advisors.

M1 enables investors to create what they call Pies. Each pie can hold individual stocks, ETFs or both. For each investment you add to a Pie, you also indicate how big each slice is. For example, you could create a Pie with the following investments:

  • VTI (50%): Vanguard’s Total U.S. Stock Market ETF
  • VXUS (30%): Vanguard’s Total International Stock Market ETF
  • BND (20%): Vanguards Total U.S. Bond ETF

The above is what is called the three fund portfolio.

M1 Finance Pie

Where M1 really stands out is how easy it makes investing in the Pies of your choice. Using the three fund portfolio above as an example, M1 will automatically allocate your investments based on the percentages you set.

As markets cause your balances in each ETF to vary from your plan, M1 takes any new contributions and investments as necessary to bring your investment Pie back in line with your plan. And if your contributions aren’t sufficient, you can rebalance a pie with the click of a button.

In addition to investing, M1 offers a high-yield checking account and an excellent cash back credit card.

Try M1 Finance

Wealthfront

Finally, Wealthfront rounds out my list of the best robo-advisors. Similar to Betterment, it provides a wealth of investing automation for a fee of just 25 basis points. Its list of features is similar to Betterment, with some notable differences.

Before getting those features and differences, however, it’s important to point out that Wealthfront announced in January 2022 that it had agreed to be acquired by UBS. How this will affect Wealthfront is unclear.

Wealthfront offers a Classic, Socially Responsible and Direct Indexing approach to investing. With a Classic portfolio, you get diversification across U.S. stocks, international stocks, and bonds. You can also chose among socially responsible ETFs.

Wealthfront portfolios

Unlike Betterment, Wealthfront also offers what is called direct indexing for accounts with at least $100,000. With direct indexing, Wealthfront invests in 100 to 600 stocks, rather than a total U.S. stock ETF such as VTI. The idea is to get the returns of an index, but with tax loss harvesting and asset location flexibility.

On the negative side, Wealthfront does not offer the help of a CFP, as Betterment does.

Try Wealthfront

Why Vanguard Digital Advisor Didn’t Make the Cut

At first glance, Vanguard Digital Advisor checks all the boxes. It offers automated investing using Vanguard ETFs. Generally Vanguard uses four ETFs to implement its investment strategy on your behalf:

  • VTI: Total U.S. Stock Market
  • VXUS: Total International Stock Market
  • BND: Total U.S. Bond Market
  • BNDX: Total International Bond Market

Vanguard automatically rebalances the portfolio periodically to keep the portfolio in line with your investment goals. In addition to investing, Digital Advisor can also help you achieve other goals, such as getting out of debt.

And if all that weren’t enough, the cost is about 0.15%, which includes the cost of the underlying ETFs.

So why doesn’t it make the cut?

Well, it wasn’t until I used the service that I experienced its many shortcomings.

First, there have been a number of technology issues. Do you see the pretty graph in the image above showing the investor’s progress? Here’s what mine looks like:

Vanguard Digital Advisor error

Vanguard tells me they are working on it.

For a week I couldn’t even enroll in the service. I kept getting this message:

Problems enrolling in Vanguard Digital Advisor

These issues may be temporary, but it gets worse.

Unlike other robo-advisors, you are limited to just five initial asset allocations. Once selected, you are limited in the changes you can make to the asset allocation. And, similar to a target date retirement fund, Vanguard will change your asset allocation as you near your retirement goal.

What’s more, you can’t tell Vanguard to leave your asset allocation alone. It changes whether you like it or not. The result is that Digital Advisor is not well suited for taxable accounts.

And even if you want to use the service in an IRA, you’d be better off with a Vanguard Target Date Fund. These funds use the same funds and cost just 8 basis points. Why pay 15 basis points for effectively the same thing. (A Vanguard rep told me that one can customize the glidepath with Digital Advisor a bit more than with a TDR fund, but the differences seem minimal at best).

In short, Vanguard’s Digital Advisor fails to make the grade.

The True Cost of “Free” Robo Advisors

There are two “free” robo-advisors that did not make my list of the top four–SoFi and Schwab Intelligent Portfolios. In both cases it’s because they have “hidden” fees. Let me explain.

SoFi

SoFi is best known for its student loan business. Several years ago it began to broaden its financial services offerings, including SoFi Automated Investing. While it doesn’t charge a management fee, they get their money another way. Let me explain.

Here’s the portfolio that SoFi suggests for me (I assumed a $1 million contribution, but the amount isn’t important):

sofi automated investing

When you click in the View details link, here are the specific funds SoFi uses:

SoFi ETFs

Notice that the selected funds include two SoFi ETFs. That’s how SoFi makes its money. And those funds are expensive and not what you might think they are.

For example, the SoFI Select 500 ETF is NOT an S&P 500 index fund. It doesn’t track that index, instead tracking something called the Solactive SoFi US 500 Growth Index. And it costs 19 basis points each year. While not outrageous, solid S&P 500 index funds typically cost less than 5 basis points.

Does this make SoFi a “bad” robo-advisor. I wouldn’t go that far. But its pricing isn’t as transparent as it should be in my opinion, and I have no interest in tracking a SoFi index with my investments. For these reasons, it didn’t make the list of the best robos.

Schwab Intelligent Portfolios

Schwab entered the robo-advisor market with its Intelligent Portfolios. Like SoFi, there are no management fees charged by Schwab. Investors just pay the fees of the underlying ETFs. Unlike SoFi, Schwab doesn’t force you to invest in ETFs that track a proprietary index.

So what’s the problem?

Schwab forces you to keep at least 6% of your portfolio in cash. And that’s how Schwab makes its money. The amount of cash you must keep goes up as your portfolio becomes more conservative.

For example, a Moderate Growth portfolio requires 9% in cash:

Schwab Intelligent Portfolios

I would much prefer for Schwab just to charge a management fee rather than requiring a significant cash position. At least then the costs would be transparent.

Methodology

My first step in creating this list was to identify a complete list of automated investing platforms. In addition to those listed above, I considered the following:

  • Etrade Core Portfolios: https://us.etrade.com/what-we-offer/our-accounts/core-portfolios
  • Axos Managed Portfolios: https://www.axos.com/invest
  • Acorns
  • Fidelity Go: https://www.fidelity.com/managed-accounts/fidelity-go/overview
  • Morgan Stanley Access Investing: https://www.morganstanley.com/what-we-do/wealth-management/access-investing/my-goals
  • Merrill Edge Guided Investing: ttps://www.merrilledge.com/guided-investing
  • Wells Fargo Intuitive Investor: https://www.wellsfargoadvisors.com/services/intuitive-investor/how-it-works.htm
  • Zacks Advantage: https://www.zacksadvantage.com/
  • UBS Advice Advantage: https://adviceadvantage.ubs.com/
  • FutureAdvisor (Blackrock): https://www.blackrock.com/futureadvisor
  • Stash: https://www.stash.com/smart-portfolio-investing
  • Ally Invest Robo Portfolios
  • SigFig
  • Ellevest
  • Interactive Advisors

I then considered the following factors:

  • Cost
  • Ease of Use
  • Account Types
  • Underlying ETFs used in portfolios
  • Additional features (particularly as it relates to planning and retirement)

Note that just because a robo-advisor didn’t make the list of the best doesn’t mean the service isn’t worth considering. For example, Acorns is a solid option for those looking for a round-up app.

How to Choose the Best Robo-Advisor for Your Needs

Robo-AdvisorBest for
BettermentBest overall robo-advisor
M1 FinanceBest free robo-advisor
Vanguard Digital AdvisorsBest for Vanguard fans
WealthfrontBest for large taxable accounts

Final Thoughts

Robo-advisors can simplify the process of investing for your future. Not all automated investing services are the same, however. It’s important to understand how a service works, its fees, and its portfolio construction before investing.

Filed Under: Investing

9 Best Investment Tracking Apps in 2023

January 16, 2022 by Rob Berger

Some of the links in this article may be affiliate links, meaning at no cost to you I earn a commission if you click through and make a purchase or open an account. I only recommend products or services that I (1) believe in and (2) would recommend to my mom. Advertisers have had no control, influence, or input on this article, and they never will.

The ideal investment tracking app makes managing investments a breeze. Investment apps can track not only the portfolio’s performance, but also its fees, asset allocation and projected future growth. What follows are the best investment tracking apps based on numerous factors, including cost, features and ease of use.

Investment Tracking Apps
Best Investment Tracking Tools
Table Of Contents
  1. Summary of Best Investment Tracking Apps
    • Personal Capital
    • Stock Rover
    • Google Sheets
    • Tiller
    • Morningstar
    • Quicken Premier
    • Mint.com
    • Fidelity Full View
    • Kubera
  2. How to Choose the Best Investment Tracking App
  3. Methodology
  4. FAQs
    • What is the best investment tracking app?
    • Are investment tracking apps hard to use?
    • How do I set up investment tracking alerts with many of the tools on our list?
  5. Other Portfolio Management Apps I’m Tracking
    • Personal Capital is offering a $100 gift card. Here are the terms:

Summary of Best Investment Tracking Apps

Personal Capital

Personal Capital is our Editor’s Choice, and an investment tracking app that I’ve used for many years. It earns our top ranking for several reasons. First, once you link your investment accounts to Personal Capital it automatically downloads all of your transaction, balance and returns data. It can link both retirement and non-retirement accounts.

Personal Capital Dashboard

Second, in addition to performance data, it gives you data on the fees charged by each of your investments, and how those fees will affect your wealth over time. Third, It integrates all of your data into a robust retirement calculator you can use to plan your future retirement. 

You can link bank accounts, credit cards, investment accounts and even the value of your home through Zillow. In this regard, Personal Capital enables you to manage all of your finances, not just your investments. 

Personal Capital is offering a $100 gift card. Here are the terms:

  • Sign up for Personal Capitals’ free, easy-to-use financial tools
  • Link bank and investment accounts of at least $250,000 (savings, investment accounts, employer-sponsored 401ks, etc.)
  • Receive a free, two-part financial analysis with our licensed experts before March 1st, 2023

You must use this link for the bonus.

Pros

  • Free 
  • Automatically downloads all of your financial data
  • Tracks your asset allocation 
  • Tracks your investment fees
  • Integrates with a robust retirement tool 

Cons 

  • Personal Capital will contact you about their investment advisory services
Try Personal Capital

Stock Rover

For those with more complicates stock portfolios, Stock Rover is an excellent option. There is a learning curve to this tool, but they provide video guides and plenty of help. Stock Rover provides a wealth of data on stocks, ETFs and mutual funds. And it also offers countless ways to evaluate individual investments or your portfolio as a whole.

The app enables you to connect all your investment accounts for automatic updates. Alternatively, you can enter your portfolio manually. It also offers pre-set portfolios you can use for evaluation purposes.

Pros

  • Robust tools and reporting
  • Connects to your brokerage and retirement accounts
  • Dividend income calendar
  • Countless charts to evaluate any investments

Cons

  • It requires an annual fee, although a reasonable one
  • Because of its rich features, there is a learning curve

Google Sheets

For those who don’t want to connect their financial accounts to an app, Google Sheets is ideal. Using the Google finance function, you can pull in data on mutual funds, ETFs and stocks. This can include a fund or company’s name, its price, performance, and its expense ratio. 

For those that don’t want to create their own, I’ve created a free investment tracking spreadsheet that you can use.

Pros

  • Free 
  • Doesn’t require connecting financial accounts to an app
  • Google Finance functions automatically download some fund and stock data 

Cons

  • Share totals are not automatically updated
  • Asset allocation is limited 
  • No retirement planning tool
  • No fee analyzer tool

Tiller

Tiller is without question my all time favorite budgeting app. What many don’t know, however, is that you can also use it to track your investments. At present, you can connect all of your investment accounts and Tiller will download your transactions and account balances. 

Tiller Investment Tracking

It also has a retirement add-on that can determine your path to retirement. I recently spoke with the folks at Tiller and understand that they are also working on another add-one that will give you insight into your asset allocation.

Pros

  • Very easy to use
  • Integrates not just investment tracking but also budgeting 
  • Uses Google Sheets so it’s ideal for those who love spreadsheets

Cons

  • Investment analysis tools are currently still limited
  • After a 30 day free trial it costs $79 a year

Morningstar

Morningstar is another tool that I’ve used for many years. In fact, I’ve created a YouTube video course that walks through how to use the robust tools offered by Morningstar. The tools include a portfolio tracker.

The one downside is that you have to enter your portfolio manually. You also have to update it manually. As a result, it takes a lot of work to keep your portfolio updated. On the plus side, Morningstar offers arguably the most robust amount of tools and analysis available today. 

Pros

  • Excellent investment tools and analysis
  • Track performance to the penny, including dividend reinvestments
  • Excellent mutual fund and ETF analysis tools
  • Free for basic portfolio tracker 

Cons

  • Data must be entered manually 
  • Data must be updated manually 
  • $199 annual fee to get access to all the morning stars data and tools

Quicken Premier

Quicken is arguably the longest surviving budgeting and personal finance software. I was using it more than 20 years ago. Today with Quicken Premier you can track your investments, including your performance and realized and unrealized gains. And it has tools to make preparing your taxes easier. It also pulls in data from Morningstar. On the downside, however, there’s an annual fee for the software of approximately $75.

Quicken Investment Tracking

Pros

  • Tracks performance of investments 
  • Tracks cost basis 
  • Makes taxes easier

Cons 

  • Quicken is somewhat outdated
  • Costs approximately $75 a year

I’ve used Quicken Premier to track investments, but today I prefer several Quicken alternatives for both investment tracking and budgeting.

Mint.com

Mint allows you to track all of your investments online. Similar to Personal Capital you connect both investment accounts as well as banking accounts and Mint downloads transactions and balances for you.

Mint
7 Best Investment Tracking Apps in 2021

It comes with portfolio tracking for investments. It will keep track of your portfolio’s performance, and any investment fees you’re being charged. One big downside to Mint.com is it uses an advertising model. As a result, sometimes it can feel like you’re being bombarded with ads. For this reason, there are several Mint alternatives to consider.

Pros

  • It’s free
  • Can manage all of your finances
  • Automatically downloads transactions and balances

Cons

  • Advertising based
  • Limited investment and portfolio analysis tools

Fidelity Full View

The last investment tracking app on our list is Fidelity Full View. Fidelity’s tool is powered by eMoneyAdvisor, a finance app used exclusively by financial planners. I have access and use eMoneyAdvisor through a financial planner I work with (although I manage our own investments). With Fidelity Full View, however, you can get many of eMoneyAdvisor’s tools without going through an advisor.

Fidelity Full View

For example, Full View enables you to track your portfolio’s performance and asset allocation. You can track your net worth and spending as well. It doesn’t, however, offer the same reporting that eMoneyAdvisor offers.

Pros

  • Free
  • Tracks asset allocation
  • Monitors spending
  • Tracks net worth

Cons

  • Limited reporting
  • Reports and graphs could be better

Kubera

Kubera is the newest investment app in the list. I’ve added it for its simplicity and a few features no other app on our list offers. First, understand that Kubera has very few features. You can connect investment accounts, your home’s value (via Zillow) and even the value of internet domains you own.

Its visual presentation is clean and simple. You can organize your investments in buckets. For example, you could separate retirement, taxable, HSA and real estate. It provides a net worth summary with graphs. You can also track insurance policies, store important documents in its virtual “Safe Deposit Box,” and add “beneficiaries” who can receive all the information in your account should you die.

What Kubera doesn’t offer, however, is any analysis of your investment portfolio. There’s no asset allocation or fee analysis, and there is no retirement planner. On top of these limitations, Kubera costs $15 a month.

Pros

  • Clean, simple interface
  • Connect investment accounts
  • Track real estate, domains and insurance policies
  • Tracks net worth

Cons

  • $15/month or $150/year
  • No investment analysis
  • Graphs and charts limited

How to Choose the Best Investment Tracking App

The best way to track your investments depends on the complexity of your portfolio. For those with just a single account, a portfolio tracking app isn’t necessary. If all of your investments are in a 401k at work, you can simply track and manage your investments through the brokerage that holds your 401k. Likewise, if you have a single IRA account, you can track that investment easily wherever it is being held.

If you’re looking to open an IRA here are the best IRA accounts available today.

If, like me, you have multiple investment accounts, a tracking app is the best way to manage your investments. That’s particularly true if you hold investments at different brokers. This is common when individuals open up IRAs at brokers and have 401k’s elsewhere. It’s also common with spouses who often have retirement accounts at different financial institutions.

For these types of portfolios, an investment tracker that automatically downloads transactions and balances is ideal. Here, you want to look for an investment app that offers tools to help you analyze your portfolio. The most important tools give you insight into your asset allocation, investment fees and retirement readiness.

We rate Personal Capital as the absolute best investment tracking app, because it does all of this for free. The other apps in our list are also good options.

Methodology

The methodology used in selecting the best investment tracking apps was simple–I’ve used each and every one of them, along with dozens of other options not listed. In most cases, I’ve used the software for years.

I based the selection on several factors:

  • Cost
  • Automation
  • Investment analysis tools
  • Retirement planning tools
  • Ease of use
  • Dashboards, charts and reports

FAQs

What is the best investment tracking app?

In my view, the single best investment tracking tool is Personal Capital. It’s free and automated and comes with a wealth of investment analysis tools.

Are investment tracking apps hard to use?

Some are and some are not. With tools like Personal Capital or Quicken, It’s simply a matter of connecting your investment accounts. Once connected, the tools analyze all of the data and present it in a way that’s easy to understand.

Some software that must be downloaded, however, has a much higher learning curve. And for that reason did not make our list of the best options.

How do I set up investment tracking alerts with many of the tools on our list?

You can get notified when any transactions occur in your account. Personal Capital for example, will email you every day, week or month to notify you of any transactions in your linked accounts.

Other Portfolio Management Apps I’m Tracking

The above apps are the best I’ve found, but I am evaluating other stock tools:

Stock Rover: I’ve been using this tool for several weeks and really like it. It can be used for index fund investors, stock traders, and everybody in between. It includes tons of research data, useful historical data, and even asset allocation portfolios you can examine.

EquityStat: Another stock tracker with a clean interface. It’s ideal for tracking the performance of an investment portfolio. Unfortunately, it doesn’t give you any insight into the asset allocation of a portfolio.

Filed Under: Investing

The 7 Levels of Financial Freedom

December 9, 2021 by Rob Berger

Some of the links in this article may be affiliate links, meaning at no cost to you I earn a commission if you click through and make a purchase or open an account. I only recommend products or services that I (1) believe in and (2) would recommend to my mom. Advertisers have had no control, influence, or input on this article, and they never will.

The Financial Independence, Retire Early (FIRE) movement has underscored the power of financial freedom. It’s the central theme in my book, Retire Before Mom and Dad. Indeed, financial freedom is the guiding principle of how I manage money.

While financial freedom sounds good, however, many see it as a destination that’s at best 30 or 40 years away. To them, it’s just a fancy way of describing retirement.

I couldn’t disagree more.

While it’s true that we can and should define what ultimate financial freedom looks like (see below), we can begin to reap the benefits in a very short period of time. Financial Freedom is more of a journey than a destination.

It’s for this reason that my book walks through what I call the 7 Levels of Financial Freedom. And that’s what we’ll cover in this article. Be sure to check out the free financial freedom calculator near the end of the article.

Table of Contents
  • 4 Key Foundational Principles of Financial Freedom
  • The 7 Levels of Financial Freedom
    • Level 1: One Month of Expenses Saved
    • Level 2: Three Months of Expenses Saved
    • Level 3: Six Months of Expenses
    • Level 4: One Year of Expenses
    • Level 5: Five Years of Expenses
    • Level 6: Ten Years of Expenses
    • Level 7: Twenty-Five Years of Expenses
  • A Simple Financial Freedom Calculator

4 Key Foundational Principles of Financial Freedom

First, there’s value to money that you never spend. This is counter to what must people think. Even retirement savings will eventually be spent, even if it’s decades later. Until the money is spent, and even for money we never spend, however, there is tremendous value.

What’s the value? Our freedom.

Second, the benefits of financial freedom are experienced much sooner than retirement. The ability to retire is an empowering feeling, but it’s not the only kind of empowerment that savings can afford. Lesser tiers of financial freedom can change someone’s mindset and options for the better. The seven levels below will explain this more clearly.  

Third, the levels of financial freedom are calculated based on monthly expenses, not income. The focus should be on how many months of living expenses our savings can cover. That’s real freedom. As a result, we focus on what percentage of our income we can save.

Finally, we use Bill Bengen’s 4%  withdrawal rule when calculating Level 7 Financial Freedom. In other words, we achieve the ultimate financial freedom when are savings equals 25x our annual expenses. For example, a retiree who spends $54,000 a year in retirement would need $1,350,000 to reach Level 7.

The 4% rule has come under fire lately. Some say that given high stock valuations and low bond yields, it’s no longer viable. Morningstar recently released a report claiming 3.3% is the new “safe” withdrawal rate. Time will tell who is right. For our purposes, we’ll continue to use 4% for planning purposes only.

The 7 Levels of Financial Freedom

For each level you’ll find how many months it will take to reach the level if you save 10%, 15%, 20% or 30% of your income. Keep in mind that the number of months won’t change for different income levels. In each case, it’s your savings rate that determines your time to each level.

You can run your own numbers with the financial freedom calculator here (described in more detail below).

Level 1: One Month of Expenses Saved

Level 1 might not seem like Financial Freedom, but it’s an important start to your journey. It’s here that you stop living paycheck-to-paycheck. You may only have a one-month cushion, but that’s a big deal. It gives you breathing room for when—not if—the unexpected happens.

Studies show that most people cannot come up with $400 for an emergency. According to a study by the Federal Reserve, 4 in 10 Americans couldn’t cover a $400 emergency with their savings. In other words, most Americans have not achieved Level 1 Financial Freedom.

Time to Level 1:

Savings RateMonths to Level 1
10%9
15%5.5
20%4
30%2.3
Assumes a 5.0% Rate of Return (very conservative)

Note that saving 20% cuts by more than half the time to Level 1 as compared to saving 10%. That’s because as we save more we spend less. We thus get the double benefit of saving more money and need less money to meet our goal of one month of expenses. I call this the Boomerang Affect in my book.

Also note that compounding has very little to do with reaching Level 1. We haven’t yet saved enough money over enough time to see the benefits of compounding. That comes around Level 4 and after, when the majority of our wealth is from compounding.

Level 2: Three Months of Expenses Saved

At Level 2, we reach what most financial gurus say is the minimum emergency fund you should have. You now have enough money in the bank to handle most emergencies. The money could even help you survive during a short-term job transition.

Reaching this point should taste sweet. If an unexpected expense pops up, there isn’t a need to borrow money to cover it. This is important given avoiding high-interest debt is essential to reaching financial freedom. 

Time to Level 2:

Savings RateYears to Level 2
10%2.1
15%1.4
20%1.0
30%0.6
Assumes a 5.0% Rate of Return

The effect of compounding interest is still in its nascent stage by Level 2. The example shows that around 5% of the ending balance comes from investment returns. Building wealth takes time.

The numbers do change when the savings rate changes. Changing the savings rate in the example to 20% instead of 10% halves the time it takes to reach Level 2. As an investor lives further and further below their means, their journey toward greater financial freedom becomes exponentially faster.

Level 3: Six Months of Expenses

Level 3 is simply the upper bound of an emergency fund, with 6 months of expenses. The balance should be able to cover the unfortunate possibility of all insurance deductibles coming due simultaneously. An extended unemployment period also would be manageable. Compound interest begins to become noticeable.   

Time to Level 3:

Savings RateYears to Level 3
10%2.1
15%1.4
20%1.0
30%0.6
Assumes a 5.0% Rate of Return

Level 4: One Year of Expenses

Level 4 is when things start to get interesting. Two things happen.

First, with one year of expenses saved, you can handle a significant bout of unemployment. Today the average person will change jobs 12 times during their lifetime. While we hope these transitions go smoothly, Level 4 Financial Freedom will help you ride out any bumps in the road.

Second, we start to see the benefits of compounding, something I call the Money Multiplier in my book. As we now know, most of our Freedom Fund doesn’t come from putting aside money each month. That’s how it starts, of course, when we are trying to reach Level 1, 2, or even 3.

Eventually, however, the money we save starts to earn a nice return. In fact, if done right, our investments will produce far more income than our jobs. That takes time, and it’s here at Level 4 that we start to get a glimpse of the power of the Money Multiplier.

Time to Level 4:

Savings RateYears to Level 4
10%7.5
15%5
20%3.7
30%2.2
Assumes a 5.0% Rate of Return

Level 5: Five Years of Expenses

At Level 5, you’ve already exceeded the savings that most will achieve in a lifetime. Assuming $50,000 in annual expenses (the round number makes the math easier), for example, you’ve amassed $250,000 in savings and investments. At a 9.3% return (the average return of an 80/20 portfolio over the last 90 years), your Freedom Fund will generate almost $25,000 in returns over the next 12 months. In other words, your investments are generating income approaching 50% of your annual spending.

Level 5 also represents a danger point. It’s here that some may become complacent. With so much money saved, it’s easy to return to old habits or to lose focus. Knowing that now will help you avoid this danger when you reach Level 5.

At this point you may be wondering what Level 5 Financial Freedom feels like. After all, one could say this is nothing more than traditional retirement savings. Oh, but it’s so much more!

Let me tell you a story.

In the middle of my career, I had a job that at times was very unpleasant. I have a vivid memory of a meeting with the boss. He was yelling at an employee on the phone. He was out of line. It was then I understood the true power of Financial Freedom.

While my wife and I hadn’t reached Level 7 at that time, we were right around Level 5. I knew I could walk out of that job if I needed to and we’d be fine financially. I wasn’t stuck. And it was a great feeling.

Less than a year later, I took a pay cut to pursue a new opportunity. I took that risk because I could; I wasn’t chained to my job or to the salary. It turned out to be the best career move of my life. And it was made possible because of Level 5 Financial Freedom.

This is an example of how money saved and never spent can have a profound effect on our lives.

Time to Level 5:

Savings RateYears to Level 5
10%23.6
15%17.7
20%13.9
30%9.2
Assumes a 5.0% Rate of Return

Level 6: Ten Years of Expenses

Level 6 is an important milestone. It’s here that your investment income will begin to equal and then exceed how much you are spending each year.

Let’s again assume you spend $50,000 a year. At Level 6, you will have a Freedom Fund totaling $500,000. A 9.3% return will generate returns of $46,500 over the next 12 months, bringing your Freedom Fund to $546,500. The following year, with a Freedom Fund totaling almost $550,000, you will on average generate just over $50,000 a year.

Talk about a great feeling! You are working hard, earning an income, and spending $50,000 a year. At the same time, your Freedom Fund is generating returns equaling the same amount. Like a snowball rolling downhill, your wealth is multiplying before your very eyes.

Time to Level 7:

Savings RateYears to Level 6
10%34
15%26.9
20%22
30%15.5
Assumes a 5.0% Rate of Return

Level 7: Twenty-Five Years of Expenses

Level 7 is the Ultimate Financial Freedom. It’s here that you can completely retire from work if you so choose. Or, if you’re like me, you can work on projects you love while still earning an income. The choice is yours.

Level 7 enabled me to retire from the practice of law at 49. Following my retirement, I continued to run my personal finance blog, newsletter, and podcast. Two years later I sold my blog, but I still record a podcast each month, and I became a Deputy Editor at Forbes for a couple of years. These activities generated income. But I did them because I’m passionate about personal finance and investing.

When you reach Level 7, you can pursue your passions. That may mean keeping your job. There’s nothing wrong with that if that’s what you love. It may mean starting a business. Here’s the point—you decide for yourself what you’ll do when you reach Level 7. It’s a beautiful feeling.

Time to Level 7:

Savings RateYears to Level 7
10%50
15%41.9
20%35.9
30%27.4
Assumes a 5.0% Rate of Return

A Simple Financial Freedom Calculator

I’ve created a free financial freedom calculator in Google Sheets. The tool is simple to use. You simply input the following four things:

  1. Rate of return
  2. After-tax income
  3. Savings rate
  4. Current savings

From there the tool estimates how long it will take you to reach each level of financial freedom.

The tool has an investment rate of return of 5% input by default. This roughly represents the historical post-inflation return of a 60-40 stock/bond portfolio. You can change the assumption to whatever you like.

Debt is conspicuously missing from the spreadsheet. This is because debt payments are accounted for in the after-tax income section. Debt repayment is considered a recurring monthly expense. It’s possible to be financially free while having some debt and the calculations reflect that.

The baseline savings rate is listed at 10%. That number is in line with conventional retirement advice. Over an average 40-45 working life an investor would be on track to retire at 65 given a 10% savings rate. Again, that figure can be changed in the spreadsheet.

Finally, be sure to alter the current savings section. Many will be starting at more than zero. The number should include emergency short-term savings as well as retirement or brokerage account balances.

Final Thoughts

Financial freedom is the best thing money can buy. As I was working toward the goal, I viewed every dollar I saved as buying my financial freedom. At first it starts off slow, but it quickly builds to the point that compounding generates far more money than we could ever make at work. The key is to get started now.

And for those that want to track their progress with a more sophisticated tool, check out Personal Capital. It’s free and the best overall net worth, investment and retirement planning tool available today.

Filed Under: Investing, Retirement

4 Best Target Date Retirement Funds in 2023

December 2, 2021 by Rob Berger

Some of the links in this article may be affiliate links, meaning at no cost to you I earn a commission if you click through and make a purchase or open an account. I only recommend products or services that I (1) believe in and (2) would recommend to my mom. Advertisers have had no control, influence, or input on this article, and they never will.

Target date retirement funds make investing in a 401(k) or IRA easy. Simply pick a fund that corresponds with when you plan to retire, and the fund does the rest. In this article we’ll look at several of the best target date retirement funds available today.

Table of Contents
  • 4 Best Target Date Retirement Funds
    • M1 Finance Target Date Retirement Funds
    • Vanguard Target-Date Retirement Funds
    • State Street Target Date Retirement Funds
    • Fidelity Freedom Index Funds
  • Target Date Retirement Funds in 401(k) Accounts
  • Backtesting Target Date Funds
  • Not All Target Date Funds are Good Investments
  • How Target Date Retirement Funds Work
  • The Downside of Target Date Funds for Retirees
  • Are Target Date Retirement Funds Diversified?
  • Final Thoughts

Target date retirement funds can be great tools for long-term investors. There are, however, factors that differentiate great target date funds from others I would not recommend. I’ve researched dozens of funds to identify the best options, as well as an example of a target date fund you should avoid.

4 Best Target Date Retirement Funds

For each of the target date funds below, we’ll explore the 2050 version. A 2050 fund is designed for those retiring around the year 2050. Each of these fund families offer funds in five-year increments (e.g., 2020, 2025, 2030).

M1 Finance Target Date Retirement Funds

M1 Finance retirement funds make the top of my list for several reasons. First, for each retirement year (e.g., 2020, 2025, 2030), M1 Finance offers three different funds. All of the other options below only offer one. Specifically, M1 Finance offers investors Aggressive, Moderate and Conservative options for each retirement year.

M1 Finance Target Date Retirement Funds

For example, the M1 Finance 2050 Aggressive Target Date Retirement Fund allocates just 3% to bonds, while its 2050 Conservative fund allocates 19% to bonds.

Second, each of M1 Finance’s funds (they call them Pies) include broad stock and bond exposure across more than a dozen low cost ETFs. Here, for example, are the ETFs used in the 2050 Aggressive fund:

M1 Finance 2050 Fund

Third, unlike the other funds in my list, there is no elevated expense ratio to pay. M1 Finance doesn’t charge a fee. The only fees are those associated with the low cost ETFs M1 uses in each portfolio, and these are lower than the fees a target date fund charges.

Finally, the fund for those now in retirement (the 2020 fund) is in my view the best option available. The Aggressive 2020 fund is approximately 60/40 stock to bond allocation a reasonable approach for retirees following the 4% rule. Without exception other retirement funds become far too conservative at this stage.

M1 Finance target date funds are automatically updated and rebalanced quarterly. There is no minimum initial investment required.

Summary

  • Expense Ratio: 0.08%
  • Dividend Yield: 1.831%
  • Minimum Investment: None
  • Website: M1 Finance

Vanguard Target-Date Retirement Funds

Vanguard’s 2050 offering, ticker VFIFX, is another solid option.

Vanguard Target Retirement 2050 Fund

The expense ratio for the fund is extremely reasonable at only 15 basis points (0.15%). Important to note given low fees often predict the later success of a fund. VFIFX checks that box. 

Turning to the Portfolio tab on Morningstar gives us a better look into the asset allocation of the fund.

Vanguard 2050 Fund Asset Allocation

Vanguard’s 2050 fund is 54% invested in US stocks and about 37% invested in international stocks. The remaining 9% of the fund is allocated to bonds. This aggressive investment mix makes sense given that it’s tailored for an investor with 30 years left to build their Portfolio. Keep in mind that this allocation will become more weighted toward fixed income as we get closer to 2050.

Vanguard implements this asset allocation plan using five Vanguard funds:

Vanguard 2050 Fund Portfolio

Five holdings doesn’t seem diversified. Here it’s important to understand that the number of funds in a portfolio tells us nothing about its overall diversification. We need to know what each of the funds owns. In this case, the holdings include thousands of stocks and more than 10,000 bonds. It’s well diversified.

Vanguard requires a $1,000 minimum initial investment.

Summary

  • Expense Ratio: 0.15%
  • Dividend Yield: 1.41%
  • Minimum Investment: $1,000
  • Website: Vanguard

State Street Target Date Retirement Funds

State Street’s 2050 target date retirement fund, ticker SSDLX, makes a strong impression with only a 9 basis point (.09%) expense ratio. It’s one of the least expensive options available today.

State Street Target Retirement 2050 Fund

Its asset allocation is similar to Vanguard’s.

State Street Target Retirement 2050 Asset Allocation

The Portfolio tab shows us the fund is invested 51% in U.S. stocks, 35% in international stocks, and about 10% in bonds. The holdings of the fund reveal more similarities to its Vanguard counterpart. It invests the fund in six index funds.

State Street Target Retirement 2050 Portfolio

Three stock funds and two bond funds substitute for the inverse with Vanguard’s offering. The U.S. stock portion of the fund is split into an S&P 500 large blend fund and a mid-cap growth fund. Still, State Street’s fund should perform in line with Vanguard’s, with the added benefit of the lower expense ratio we saw earlier. 

Summary

  • Expense Ratio: 0.09%
  • Dividend Yield: 1.32%
  • Minimum Investment: None
  • Website: State Street

Fidelity Freedom Index Funds

The final fund is Fidelity’s Freedom Index 2050 Investor, ticker FIPFX. The exact naming of this fund is important to note. FIPFX has the word index in the fund name. Fidelity offers another Freedom 2050 target-date fund, but the underlying holdings consist of actively managed mutual funds.

As a result, that fund charges 75 basis points (.75%) in fees. In contrast, the Freedom Index fund only charges 12 basis points (.12%). That expense ratio puts the Fidelity fund in between State Street’s and Vanguard’s options.

Fidelity Freedom Index 2050 Fund

The asset allocation of this fund is nearly identical to the Vanguard, State Street and M1 Finance Moderate funds.

Fidelity Freedom Index 2050 Fund Asset Allocation

Nothing surprising jumps out–53% of the fund is allocated to U.S. stocks and 37% to international stocks. Bonds fill out the remaining 10%. 

The holdings of the fund shouldn’t shock anyone either. Fidelity uses Fidelity index funds to implement its asset allocation.

Fidelity Freedom Index 2050 Fund Portfolio

Overall, another sensibly arranged portfolio–Diversified, low-cost, and convenient. 

Summary

  • Expense Ratio: 0.12%
  • Dividend Yield: 1.18%
  • Minimum Investment: None
  • Website: Fidelity

Target Date Retirement Funds in 401(k) Accounts

If target-date retirement funds are starting to seem like attractive options, it might be worth considering holding a target date fund in a 401k if one is available to you. Since company 401(k) plans often invest hundreds of millions at a time, mutual fund providers may offer companies an expense ratio discount to attract their business.

For example, ticker FRLPX is the Fidelity Freedom Index 2050 option offered in my 401(k) at Forbes. This version of the fund has the same asset allocation, holdings, and glide path but charges half the fees of the non-401(k) investor class fund. 

I mention this industry convention not only to highlight the fee difference but also to prevent any confusion when picking funds in a 401(k). If there’s any doubt as to whether one fund mirrors another, it’s best to check the Portfolio tab on the Morningstar listing for both funds and make sure the only difference is the expense ratio.

Backtesting Target Date Funds

For a performance comparison of the funds, we’ll be using Portfolio Visualizer. This site is great for backtesting portfolio options and provides a number of useful metrics for weighing funds. The data set will be limited by the age of the newest target-date retirement fund, but we have a reasonable length of time to compare the funds. 

Target Date Fund Performance

The 3 funds compete very closely with one another. The Fidelity fund ultimately wins out by only a couple hundred dollars. The standard deviation of the funds, a measure of portfolio volatility, is fairly uniform from fund to fund. The same goes for the maximum drawdown period of the funds. Safe to say, any of the three funds are reasonable and comparable options.

The M1 Finance fund has had similar return and risk characteristics.

Not All Target Date Funds are Good Investments

I’ve chosen one fund that exemplifies some suboptimal aspects that should signal investors to steer clear. I do this not to belittle the mutual fund company or fund in particular, but to illustrate what potential negative qualities of target date funds can cost investor’s future returns.

The fund is called the American Century One Choice 2050, ticker ARFMX. I would avoid the fund for two main reasons. 

American Century One Choice 2050 Fund

First off, the fund’s expense ratio is simply too high. American Century charges over 1%, making it more than 10 times as expensive as the fund options we’ve looked at. Unfortunately, that isn’t the end of the fees associated with investing in the fund. ARFMX has a front load fee, meaning there’s a sales charge paid every time you buy into the fund. Purchasing through a 401(k) would bypass that fee. Otherwise, and I can’t caution against this enough, that fee would recur every time a contribution is made.

ARFMX Fees

The second reason why I’m not a fan of this fund is its asset allocation.

American Century One Choice 2050 Asset Allocation

Remember that American Century’s target date is a 2050 fund just like the 4 funds we explored. That means the typical investor in the fund is 30 years away from retirement. Nevertheless, the fund allocations 22% in bonds. For some investors, that conservative approach might be attractive. But in my estimation, that is too cautious a strategy for investors with such long time horizons.

An 80/20 split between stocks and bonds is perfectly reasonable in a vacuum, but remember the fund will increase its bond allocation over time. Overall, the fund is a suboptimal choice given its fee burden and asset allocation. 

The American Century fund performance in comparison to Vanguard’s offering should bear out my concerns. 

American Century One Choice 2050 Performance

That data for this backtest in Portfolio Visualizer goes back to 2009. The fund’s fees and asset allocation drag on the ugly duckling fund to the tune of almost a full percent less in returns.

The key point is to recognize that not all target date funds are created equal.

How Target Date Retirement Funds Work

Target date retirement funds feature a date in their name. For example, the funds we’ve discussed are 2050 funds. The date corresponds to the investor’s planned retirement date. Somebody seeking to retire in about 30 years would be especially interested in 2050 funds.

Target date retirement fund offerings are typically spaced out in 5-year increments, meaning there are 2045 and 2055 versions of the funds we’ve explored. Picking a retirement date is not an exact science and things do change. Still, having a target date in the fund name provides some useful information about the fund’s asset allocation today and in the future. 

Target date retirement funds hold a combination of U.S. stocks, international stocks, and bonds. The specific weighting of those asset classes adjusts over time and can vary between mutual fund companies. The expense ratio associated with target date funds goes, in part, toward paying for these adjustments. Allocation adjustments are made based on “glide paths”, which are predetermined rebalancing plans that each target date retirement fund follows.

As investors get closer to their chosen retirement date, target date funds shift more heavily toward bonds and away from stocks. This shift is meant to reduce portfolio volatility during investors’ retirements. An attractive approach in theory but one that can create some pitfalls, which we’ll address next. 

The Downside of Target Date Funds for Retirees

Target date funds are a reasonable approach to investing for retirement. Once you reach retirement, however, these funds have a downside. They become far too conservative.

These funds follow a declining glide path. That simply means that as we get closer to retirement, the funds move stock investments over to bond investments. That in itself is reasonable. The problem is that they become far too conservative.

For example, the Vanguard Target Retirement 2015 fund is only 30% invested in stocks. A retiree six years in might want the security of a healthy bond allocation, but I would argue there’s such thing as being too safe. Granted, I’ve shifted my own investments into safer investments in retirement. Still, I wouldn’t recommend divesting a portfolio of stocks past the 50% mark.

In fact, Bill Bengen, the father of the 4% rule, found that a retiree’s portfolio should have 50% to 75% in stocks. Anything less and their odds of running out of money early go up.

With the exception of M1 Finance, each of the target date funds mentioned above fall well below the 50% equity floor.

Are Target Date Retirement Funds Diversified?

Diversification is important to any investor. Investing in a single mutual fund seems counter to that idea, but not in the case of target date retirement funds. Target date retirement funds provide ready-made diversified portfolios that hold thousands of domestic and international stocks and tens of thousands of bonds of various credit qualities. So yes, these funds are well diversified.

Final Thoughts

While I don’t personally invest in target date retirement funds, they are still reasonable and effective options. I advocate that investors start their wealth-building plans with a 3-fund portfolio. That said, the solid target date fund options we’ve discussed are all reasonable approaches to retirement investing.

Filed Under: Investing, Retirement

  • « Go to Previous Page
  • Go to page 1
  • Go to page 2
  • Go to page 3
  • Go to page 4
  • Go to page 5
  • Go to Next Page »

Primary Sidebar

Featured Bank Offers

Sallie Mae 14-Month No-Penalty CD offered by SaveBetter: 4.40% APY


Sallie Mae 27-Month CD offered by Save Better: 5.00% APY

My Book

 

 

Buy it on Amazon

Latest Articles

6 Best Tax Software Programs in 2023 (for 2022 Returns)

Personal Capital vs Mint: My Ratings After Using Both for Years

Best Round-Up Apps for Saving and Investing in 2023

13 Best Investment Broker Bonus Offers of 2023

8 Best Mint Alternatives for 2023 (Free & Paid)

© 2022 RobBerger.com. All Rights Reserved. Contact | Privacy Policy | Terms of Use