7.1 in Retirement Income
U.S. News evaluated 58 Retirement Income Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.
| Scorecard | |
|---|---|
| Morningstar | 4 / 5 Stars |
| Lipper | 4 2 5 5 4 |
| Zacks Investment Research | 3 (Hold) |
| Standard & Poor's | 4 / 5 Stars |
| TheStreet.com | C (Hold) |
Fund Overview
This fund is kind of like a value meal. Instead of buying your stock and bond funds separately, you buy one product and get a bunch of funds packaged specifically for retirees. “It’s a solid one-stop option,” Morningstar analyst David Falkof says, especially for investors who don’t want to wade through pages of research to find the right portfolio allocation for retirement.
As of April 04, 2012, the fund has assets totaling almost $8.39 billion invested in 6 different holdings. Its portfolio consists of seven other Vanguard stock and bond funds.
In late September 2010, Vanguard announced plans to consolidate the underlying funds in its target retirement fund series over 12 months. Three underlying international portfolios—Vanguard European Stock Index, Vanguard Pacific Stock Index, and Vanguard Emerging Markets Stock Index—will be replaced with a single, broad international stock index fund to ramp up international equity exposure. “The increased international allocation will incrementally increase diversification and hence, marginally reduce the volatility of the funds over the long term,” said Vanguard chief investment officer Gus Sauter in a press release. Sauter also noted that the change will reduce the “home bias” of the funds.
Its holdings in large-cap stocks and high-quality bonds has helped the fund ride out the tumultuous market over the past couple of years, and according to Morningstar, Vanguard’s Retirement Income Fund landed in the top 15 percent of its category over the past trailing five-year period, despite its above-average equity weighting. The fund has returned 7.11 percent over the past year and 11.71 percent over the past three years.
The fund’s diverse asset mix and the strong performance of its underlying funds have helped it deliver fairly steady returns over the long term. The fund has returned 5.30 percent over the past five years.
| Trailing Returns | Updated 03.31.2012 |
|---|---|
| Year to date | 3.9% |
| 1 Year | 7.1% |
| 3 Years (Annualized) | 11.7% |
| 5 Years (Annualized) | 5.3% |
| 10 Years (Annualized) |
Investment Strategy
Intended for investors already in retirement, the Vanguard Retirement Income Fund seeks to provide a steady stream of income and some capital appreciation by investing in a mix of seven Vanguard index stock and bond funds. The fund is passively managed, meaning that it seeks to at least match its benchmark, the MSCI All Country World index. This fund is the most conservative of Vanguard’s retirement income products and generally keeps about 70 percent of assets in bonds and cash, and about 30 percent in domestic and international stocks.
Role in Portfolio
Morningstar calls this fund a “core” holding.
Fund Opinion
The fund appears on the 2011 Money 70 list of recommended mutual and exchange-traded funds.
Money 70
In the annual Lipper/Barron’s Fund Families Survey of 2010, the Vanguard Group ranks 25 out of 57 fund families surveyed.
Lipper 2011-04-05
Management
The fund is composed of a slew of other Vanguard funds, so multiple managers and analysts affect the fund’s ultimate performance. Duane Kelly, advisor for the fund since 2003, manages day-to-day activities while John Ameriks and John Hollyer lead separate investment counseling and risk-management teams to address asset allocation and strategy.
Performance
The fund has returned 7.11 percent over the past year, 11.71 percent over the past three years, 5.30 percent over the past five years, and ((UNHANDLED FORMAT TYPE: percents, NoneType for None)) over the past decade.
Hypothetical Growth of $10,000
Updated 03.31.2012
Holdings
The Vanguard Target Retirement Income fund includes seven other Vanguard bond funds, stock funds, and inflation-protected mutual funds scattered across market sectors. Most of the underlying funds tend to be large- to giant-cap and concentrated in the financial services, healthcare, and industrial materials sectors.
Asset Allocation
| % Long | % Short | % Net | |
|---|---|---|---|
| Cash | 7.1 | 0.0 | 7.1 |
| Stocks | 20.98 | 0.0 | 20.98 |
| Bonds | 58.63 | 0.0 | 58.63 |
| Other | 0.35 | 0.0 | 0.35 |
| Foreign Bonds | 4.1 | 0.0 | 4.1 |
| Foreign Stocks | 8.8 | 0.0 | 8.8 |
| Convertible | 0.0 | 0.0 | 0.0 |
| Preferred | 0.06 | 0.0 | 0.06 |
Updated 12.31.2011
Top Holdings
Performance as of 03.31.2012
Portfolio as of 12.31.2011
| % Net Assets | |
|---|---|
| Vanguard Total Bond Market II Idx Inv | 45.08 |
| Vanguard Total Stock Mkt Idx Inv | 21.14 |
| Vanguard Inflation-Protected Secs Inv | 19.81 |
| Vanguard Total Intl Stock Index Inv | 8.97 |
| Vanguard Prime Money Market Inv | 4.87 |
Fees
Vanguard Target Retirement Income has an expense ratio of 0.00 percent.
Risk
As with other retirement income products, this fund is not a guaranteed source of income.
