cross-posted from: https://lemmy.world/post/20168637
Is a TDF a good choice for growing my money, in this case? I plan to use it for a house down payment and withdraw it in 5-7 years. I’ve been thinking of putting it in a 2030 or 2035 TDF. Should I go this route or just VTSAX and chill?
Good point on the volatility, thank you for pointing that out. TDFs are decently diversified and I have a strong stomach so I’m not super concerned.
I’m also considering doing a CD ladder or a T bill ladder but the idea of just auto depositing money into a brokerage is appealing.
If you can be flexible on timing - put off the home purchase for a couple years if there happens to be a crash right at your target date, then a lot of volatility concerns fade. Of course, the middle of a crash is also when home prices will be lowest.
Vanguard’s actual asset allocation on their TDFs is https://retirementplans.vanguard.com/VGApp/pe/pubeducation/investing/LTgoals/TargetRetirementFunds.jsf and there’s a simple asset allocation - return calculator https://smartasset.com/investing/asset-allocation-calculator There’s a bunch of them around, that was just the first one with error bars that came up for me, but it will give you a better sense of both how much and how variable the full equity vs the ~60/40 TDF will be. I like error bars. To my eye, it looks like there’s not much difference in the 5-year median or 25th percentile performance, but a notable upside potential in the 75th percentile. That’s why I say, if you’re comfortable with the volatility, you might as well go all the way.
Thank you for finding those!! Yeah I am flexible, no rush. I will keep learning 🧐