Vanguard Target Retirement Funds Open to Investors; New Study by Vanguard Explores Different Life-Cycle Fund Approaches.Business Editors VALLEY FORGE Valley Forge, on the Schuylkill River, SE Pa., NW of Philadelphia. There, during the American Revolution, the main camp of the Continental Army was established (Dec., 1777–June, 1778) under the command of Gen. George Washington. , Pa.--(BUSINESS WIRE)--Oct. 27, 2003 Vanguard Vanguard Any of three unmanned U.S. experimental satellites. Vanguard I (1958), the second U.S. satellite placed in orbit around Earth (after Explorer 1), was a tiny 3.25-lb (1.47-kg) sphere with two radio transmitters. today began accepting investments into its six new Target Retirement Funds, a series of low-cost, funds-of-funds that provide investors a simple solution for investing for retirement. Five of the funds feature a different target retirement date (2005, 2015, 2025, 2035, 2045), and they gradually grad·u·al adj. Advancing or progressing by regular or continuous degrees: gradual erosion; a gradual slope. n. Roman Catholic Church 1. and automatically shift their underlying fund mix to a more conservative asset allocation Asset Allocation The process of dividing a portfolio among major asset categories such as bonds, stocks or cash. The purpose of asset allocation is to reduce risk by diversifying the portfolio. as the retirement date draws near. Vanguard Target Retirement Income Fund is designed for those investors currently in retirement. Unlike most fund-of-funds sponsors, Vanguard will not levy To assess; raise; execute; exact; tax; collect; gather; take up; seize. Thus, to levy a tax; to levy a Nuisance; to levy a fine; to levy war; to levy an execution, i.e., to levy or collect a sum of money on an execution. A seizure. an additional layer of charges for managing the underlying funds. Vanguard(R) Target Retirement Funds will have expenses (based on their underlying funds) ranging from 0.21% to 0.23% ($2.10 - $2.30 for every $1,000 invested), significantly lower than the 1.33% ($13.30 for every $1,000 invested) industry average (source: Lipper Business Description Lipper, Inc., a subsidiary of Reuters provides mutual and hedge fund information, analytical tools, data and commentary. Lipper's benchmarking provides a guidepost to asset managers, fund companies, financial intermediaries, traditional media, ). The asset allocation mixes for each of the Target Retirement Funds are:
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Fund Name Initial Allocation
(Will Shift Over Time)
Stocks / Bonds / Reserves
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Target Retirement Income Fund (1) 20% / 75% / 5%
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Target Retirement 2005 Fund 35% / 65% / 0%
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Target Retirement 2015 Fund 50% / 50% / 0%
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Target Retirement 2025 Fund 60% / 40% / 0%
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Target Retirement 2035 Fund 80% / 20% / 0%
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Target Retirement 2045 Fund 90% / 10% / 0%
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(1) Allocation is static
The Target Retirement Funds will complement Vanguard's existing series of life-cycle life-cycle - software life-cycle funds--Vanguard LifeStrategy Funds. Broadly, life-cycle funds life-cycle fund A mutual fund that maintains a certain mix of stocks and bonds in order to attract investors of a given age and risk preference. Mutual fund families sometimes offer several different life-cycle funds with various asset allocations so as to provide a well-diversified investment solution in a single fund. However, life-cycle funds follow one of two approaches - targeted maturity funds, which shift their asset allocation from aggressive to conservative over time (i.e., Vanguard(R) Target Retirement Funds), and static-allocation funds, which maintain a defined asset allocation, with investors determining which portfolio mix is appropriate at any given time (i.e., Vanguard(R) LifeStrategy Funds). "Recent consumer behavior studies have shown that many investors can become overwhelmed o·ver·whelm tr.v. o·ver·whelmed, o·ver·whelm·ing, o·ver·whelms 1. To surge over and submerge; engulf: waves overwhelming the rocky shoreline. 2. a. by a choice of too many funds, and that can hinder hin·der 1 v. hin·dered, hin·der·ing, hin·ders v.tr. 1. To be or get in the way of. 2. To obstruct or delay the progress of. v.intr. or even deter people from investing for retirement," said Catherine Gordon Gordon, river in W Tasmania, Australia, 125 mi (200 km) long. Flowing from mountains to the W coast, its main tributaries are the Franklin and Denison from the N, and Serpentine and Olga to the S. , Principal - Vanguard Investment Counseling and Research Group. "Life-cycle funds eliminate this choice overload In Social Psychology theory, research into situations where people are confronted with many choices versus just a few choices. These findings have results that run counter to the popular notion that more choice is better. by providing a one-fund solution to retirement savings." Because of their simplicity Simplicity is the property, condition, or quality of being simple or un-combined. It often denotes beauty, purity or clarity. Simple things are usually easier to explain and understand than complicated ones. Simplicity can mean freedom from hardship, effort or confusion. , low-costs, and broad diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. , life cycle funds appeal to a broad range of investors seeking a single choice option, including younger individuals just starting their retirement programs, as well as those looking for Looking for In the context of general equities, this describing a buy interest in which a dealer is asked to offer stock, often involving a capital commitment. Antithesis of in touch with. an ideal vehicle for their IRA Ira, in the Bible Ira (ī`rə), in the Bible. 1 Chief officer of David. 2, 3 Two of David's guard. IRA, abbreviation IRA. or company retirement plan rollover A graphic element in an application or on a Web page that changes its color or shape when the pointer is moved (rolled) over it. See JavaScript rollover. See also n-key rollover. . Life-cycle funds are also popular options within 401(k) and other defined contribution programs. Vanguard's Investment Counseling and Research Group has issued a new study, "Funds for Retirement: The 'Life-Cycle' Approach," to help plan sponsors select between the two types of life-cycle funds. The Vanguard Group, headquartered in Valley Forge, Pennsylvania This article is about the Village of Valley Forge, in southeastern Pennsylvania. For other uses, see Valley Forge (disambiguation). The Village of Valley Forge is an unincorporated settlement located on the west side of Valley Forge National Historical Park at the , is the nation's second largest mutual fund firm and a leading provider of company sponsored retirement plan services. Vanguard serves some 17 million shareholder accounts and manages nearly $650 billion in U.S. mutual fund assets Fund assets The total value of a portfolio's securities, cash, and other holdings, minus any outstanding debts. , including more than $180 billion in employer-sponsored retirement plans. Vanguard offers 118 funds to U.S. investors and 35 additional funds in foreign markets. Note to editors: The "Funds for Retirement: The 'Life-Cycle' Approach," study is available upon request. Vanguard funds are offered by prospectus A document, notice, circular, advertisement, letter, or communication in written form or by radio or television that offers any security for sale, or confirms the sale of any security. only. Prospectuses contain more complete information on risks, distribution charges, and other expenses and should be read carefully before you invest. Prospectuses can be obtained directly from The Vanguard Group. Vanguard Marketing Corporation, Distributor.
Comparison of Vanguard(R) Target Retirement Funds and Vanguard(R)
LifeStrategy Funds
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Vanguard(R) Target Vanguard(R)
Retirement Funds LifeStrategy(TM) Funds
--------------- ---------------------------- -------------------------
Approach Targeted maturity funds Static-allocation funds
--------------- ---------------------------- -------------------------
Number of Funds Six Four
in Series Target Retirement Income LifeStrategy Income Fund
Fund LifeStrategy Conservative
Target Retirement 2005 Fund Growth Fund
Target Retirement 2015 Fund LifeStrategy Moderate
Target Retirement 2025 Fund Growth Fund
Target Retirement 2035 Fund LifeStrategy Growth Fund
Target Retirement 2045 Fund
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Types of Low-cost index funds: Low-cost index funds:
Underlying Vanguard(R) Total Stock Vanguard(R) Total Stock
Funds Market Index Fund, Market Index Fund,
Vanguard(R) European Stock Vanguard(R) Total
Index Fund, Vanguard(R) International Index
Pacific Stock Index Fund, Fund, Vanguard(R) Total
Vanguard Total Bond Market Bond Market Index Fund
Index Fund
Two actively managed
Two actively managed funds: funds:
Vanguard(R) Inflation Vanguard(R) Asset
Protected Securities Fund, Allocation Fund,
Vanguard(R) Prime Money Vanguard(R) Short Term
Market Fund Corporate Fund
--------------- ---------------------------- -------------------------
Sales Charge None None
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Expense Ratio 0.21% -- 0.23% (based on 0.27% -- 0.28% (based on
underlying funds) underlying funds)
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Risk Profile This approach assumes that Investors typically
investors who share a assess their own risk
retirement date have tolerance by responding
similar objectives and risk to a questionnaire.
tolerance.
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Asset The fund's advisor The fund is periodically
Allocation automatically changes the rebalanced to maintain
Shifts asset allocation over time its stated allocation.
to make the portfolio The investor decides
increasingly conservative when and how to shift to
as the target date a more conservatively
approaches. allocated fund as
retirement draws near.
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Allocation All asset allocation changes Periodic monitoring by
Monitoring occur within the fund, the investor is
eliminating the need for necessary to ascertain
the investors to rebalance. whether the fund's asset
As with any other allocation matches the
investment, however, a investor's risk profile
change in personal time through the stages of
horizon or investment accumulation,
objective warrants a review transition, and
of the portfolio. retirement.
--------------- ---------------------------- -------------------------
Investor Time The time horizon is The time horizon is not
Horizon predetermined, based on the predetermined. Investors
fund's target date. have flexibility to
change their asset
allocations based on
their changing time
horizon.
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