Investing in two different TDIFs?

Hi there!

I’m new to all of this, so I’ve come here for guidance :smiley:
I already maxed out my Roth IRA and invested the $6000 into FFIJX (2065 TDIF). I was born in 1995 so if I did the +65 rule that would land me in the FDKLX (2060 TDIF), but I added 5 more years to be more aggressive (per Jeremy’s recommendation somewhere in the course).

I want to invest more and have opened a brokerage account with Fidelity as well. My question is this: should I invest the brokerage account $ into the 2060 TDIF (the ‘+65 recommended’ one for my age)? OR should I continue to invest in the 2065 TDIF? I know they are extremely close now, but would it benefit me to have some $ in the 2060 TDIF as well for in the future when the allocation starts to shift?

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The answer is “it’s so close that it’s not going to make any meaningful difference to your life”. In fact those two funds will be identical for the next couple decades at least. Notably, the federal government in their TSP offers target date funds in only 10 year increments because it really doesn’t matter that much.

We can’t compare them right now because they’re identical, but let’s imagine this conversation happening 30 years ago and comparing all in on 2035 vs splitting with 2030. If you went all in on 2035 you would have:

  • US Stock: 45.5%
  • International stock: 30.9%
  • Bonds and cash: 23.6%

If you bought both 2030 and 2035 equally you’d have:

  • US Stock: 41.0%
  • International stock: 27.8%
  • Bonds and cash: 31.2%

How different will THOSE two portfolios perform? Nearly identically. Here’s a backtest of those two portfolios over 26 years. he difference in performance was annually about 0.17%. And of course this if it was fixed for all 26 years, and the target date funds will be reallocating as time goes on.

So, that was a very long winded way of saying: Do whatever. I’M PERSONALLY a fan of ultimate simplicity and keeping it the same. If you wanted to put the earlier year in the brokerage account under the theory you might be accessing that money earlier, that would be reasonable. (There’s still an argument that it should be based on your lifespan, not when you plan to access it, but both are reasonable).

So there you go. Do whatever :slight_smile:

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