Vanguard Target Retirement 2030 Fund (VTHRX) Review

Vanguard Target Retirement 2030 Fund (VTHRX) Review: Many people put off their dreams until retirement. They plan to leave the working world and travel, garden, and spend time with their families. Perhaps they will buy a log cabin in the mountains or finally move to a place where it is sunny and warm year-round. All of those dreams depend on smart financial planning along the way. Careful saving and investing over many years is key to having the kind of retirement you want.

As your retirement years get closer, it’s critical to make specific financial moves to protect the funds you have been setting aside for decades. Instead of high-risk, high-reward stocks, it’s time to transition into reliable income-generating assets that won’t tumble in value if there is a downturn in the market.

Selecting a specific mix of assets for your portfolio with optimal diversification and regular rebalancing is a full-time job – and it requires a level of financial expertise that most people lack the time or interest needed to attain.

Instead, smart investors are choosing targeted retirement funds that consider your age and projected retirement date. Such funds do all of the complicated financial maneuvering for you with the aim of ensuring your savings is there for you when you are ready to live your dreams.

What is VTHRX?

The Vanguard Target Retirement 2030 Fund (VTHRX) is one such option, designed especially for those who expect to leave the workforce between 2028 and 2032.

It is managed by Vanguard, a company that sets itself apart through a unique ownership structure. Instead of being owned by a handful of private parties, Vanguard funds are owned by its clients. That means less pressure to generate profits through fees, so you keep more of your money as compared to investors with other firms.

Vanguard has a collection of target retirement funds based on expected retirement dates ranging from right now to 45 years in the future. The longer you have to save, the more your fund leans towards riskier investments like stocks. Even if there is a market downturn along the way, 45 years is plenty of time to recover.

If, on the other hand, your retirement is imminent, your target retirement fund is more focused on income-based assets. These tend to be less volatile and present lower risk, ensuring your portfolio won’t suddenly drop in value just as you are ready to leave the workforce.

What is a 2030 Retirement Fund?

A 2030 Retirement Fund like VTHRX has gradually reduced risk exposure over time. Unlike 2050 Retirement Funds, 2030 Retirement Funds no longer hold 90 percent of assets in stocks. The 2030 Retirement Funds are still working towards building wealth, so managers find a suitable balance.

Often, today’s 2030 funds invest roughly 70 percent of assets in higher-risk equities, with 30 percent of assets in safer low-risk bonds. In the case of VTHRX, investors hold four underlying Vanguard funds that make up this mix.

As 2030 draws closer, that mix will continue to change, until eventually it mirrors the standard Target Retirement Income Fund. Retirement Income Funds are intended for those in the process of retiring or who are already retired, and they are designed to provide reliable income throughout the retirement years.

VTHRX Fact Sheet

You have choices when it comes to 2030 funds, so it is important to understand the basics before investing in VTHRX. These are the facts you need to make a smart decision:

• Acquired fund fees and expenses as of 01/28/2019 – 0.14 percent

Note: The industry average for these types of funds is 0.63 percent. Vanguard’s lower fee structure means means you keep more of your money.

• Minimum Investment – $1,000
• Fund Total Net Assets – $40.8  billion
• Year-to-Date Investment Returns as of 12/13/2019 – 19.63 percent
• 52-Week High 12/13/2019 – $36.87 per share
• 52-Week Low 01/03/2019 – $30.47 per share

Average Annual Returns as of 09/30/2019:

• One Year – 4.15 percent
• Three Years – 8.29 percent
• Five Years – 6.67 percent
• Ten Years – 8.92 percent

This is in line with average returns for similar funds.

VTHRX Investment Strategy

The Vanguard Target Retirement 2030 Fund looks quite different from funds with later target retirement dates.

It has transitioned from heavy investment in high-risk equities to a more moderate approach to risk. Today, the underlying assets that make up VTHRX include the following:

• Vanguard Total Stock Market Index Fund Investor Shares – 41.35 percent
• Vanguard Total International Stock Index Fund Investor Shares – 27.32 percent
• Vanguard Total Bond Market II Index Fund – 22.19 percent
• Vanguard Total International Bond Index Fund Investor Shares – 9.15 percent

Compare this to the investment strategy in place for Vanguard’s Target Retirement Income Fund  (VTINX). Because this fund is intended for people who are ready to retire – or have already done so – there is a stronger focus on generating income and reducing risk.

• Vanguard Total Stock Market Index Fund Investor Shares – 18.20 percent
• Vanguard Total International Stock Index Fund Investor Shares – 12.20 percent
• Vanguard Total Bond Market II Index Fund – 37.20 percent
• Vanguard Total International Bond Index Fund Investor Shares – 15.90 percent
• Vanguard Short-Term Inflation-Protected Securities Index Fund – 16.50 percent

While VTHRX still has more focus on stocks than VTINX, it is clear that the two are coming closer together as compared to 2065 funds.

VTHRX Review Summary

The bottom line is that targeted retirement funds are a much simpler approach to investing than managing a portfolio on your own.

While it is possible that an experienced investor could generate higher returns independently, it would require constant focus on keeping the portfolio properly diversified and regularly rebalanced. That sort of commitment isn’t for everyone.

If you are looking for an investment vehicle that handles the details for you, the Vanguard Target Retirement 2030 Fund (VTHRX) is a smart choice. Fees are far lower than industry peers, and to date, returns have kept pace with the industry average for similar funds.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.