I understand the love for Target Date Funds and my TSP is fully in one of the lifecycle funds. But for my Roth IRA, and in general, I'm questioning some things. I'm probably just an idiot so help me out and thanks in advance.
Let's say you are an early 30s individual starting to invest in a TDF on a Roth IRA. You have TSP, federal pension, and social security down the line, so the Roth IRA is on the side. As guinea pig funds let's take the Schwab SWYJX Target Index 2055 and Schwab SWTSX Total Stock Index. You didn't start investing when you were 20, so you already feel a bit behind. For the Roth, long term gains are the goal, not lowering short term risk.
Why on Earth would you want to be in bonds and international to such a large extent in SWYJX? Couldn't you very easily get superior returns from staying in the admittedly more volatile SWTSX for 10-15 years, selling during a good period, and switching to the TDF for the last 20 or so years?
I understand the concepts of diversification and the ease of the TDF, and also that past superior returns on SWTSX or similar funds are no guarantee of future returns. But the more I read, the more the consensus seems to be that long term stock index holders do best. So my question can be distilled down to: why not hold a riskier but higher growth index fund to enjoy better returns for a mid to long period and then shift to the TDF later on during a good time, and enjoy the diversification and portfolio adjustment it provides during your sunset years? What am I missing? Why not just be fashionably late to the TDF party, wouldn't you still reap the benefits?
Thanks so much.
Submitted September 15, 2018 at 11:13AM by Hard-Rain-Falling https://ift.tt/2QyKtXy
