Current Asset Allocation vs. Target Asset Allocation

Investing
#1

I opened a Vanguard Roth IRA in 2020 investing in VFFVX (Target Date Retirement Fund 2055). I opened my account in March 2020 with $1000 and recently started contributing to max out 2020 (currently at $5500) and then will begin maxing out 2021.

From my understanding, by picking VFFVX, the asset allocation will adjust itself accordingly as I approach retirement. Right now the target allocation is 54% stock, 10% bond, and 36% short term reserves.

However, my current portfolio is 90% stocks, 10% bonds, and 0% short term reserves. I am very confused by this as I thought VFFVX automatically sets this up for me and should be 54/10/36%.

I’m now thinking that when I opened this account last year, I probably mistakenly set it at 90/10? How can I fix this?

Thanks in advance.

#2

Hi Nick,
Where are you getting short term reserves? Looking up VFFVX I see 36% in international stocks.
Can you elaborate on your 90/10 portfolio and how that’s split? Is that referring to VFFVX or does that include different funds?

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#4

Hi @vivitron

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I uploaded a screenshot of my portfolio analysis from my Vanguard app. When I opened my Roth IRA, I’ve only been contributing to VFFVX.

When I go to “portfolio analysis” I am able to edit the target for allocations. Based on the screenshot, I customized it to 36/10/54. I think I did more than necessary by changing the allocation percentages? I suppose I should call Vanguard customer service next week and ask how to reset my portfolio to simply follow the target date automation so that I don’t have to do anything.

Hope this helps.

-Nick

#5

Hi @vivitron

I went back to Jeremy’s index fund course to review the information regarding asset allocation. I think I was just confusing myself when looking at the numbers on my Vanguard account. His example with the 2050 target index fund also shows 90/10 with the further breakdown of 54/36/10.

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Sorry for the multiple replies, haha.

#6

Hi Nick, thanks for the screenshots and clarification!

The target asset mix actually doesn’t do anything, but it’s just a guide to show whether you’re balanced in the way that you want to be. So the fact that you messed with it won’t affect you:

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This tool is for people with multiple funds in their portfolio e.g. the 3 fund portfolio. But in your case with only a target date fund, this feature has no use for you haha. So you’re good!

Did you see the new bonus section about rebalancing? Not like it matters for you but if you’re curious, Jeremy explains how he does it!

#7

Hi Vivi,

Thanks so much for clarifying this!

-Nick