S&P 500 outperforms Target Date Index Fund?

Investing
#1

Looking to retire around the year 2055. In my Roth IRA I am trying to decide between investing in the S&P 500 like Warren Buffett suggests or the 2055 Target Date Index Fund that Jeremy Schneider suggests. Looking at historical data of the two, it seems like the S&P 500 outperforms the TDIF by about double (with even lower expense ratio).

FDEWX (2055 TDIF):
1 year: +12.8%
5 year: +51.59%
~10 year: +101.11%

FXAIX (Fidelity 500 Index):
1 year: +24%
5 year: +100.08%
~10 year: +236.21%

Understandably the TDIF gradually shifts towards less risk, but is there any other reason to choose it over the S&P 500?

Or does it make sense to put 1/2 towards the TDIF and 1/2 towards the S&P 500? I know that the S&P 500 already makes up a significant portion of the TDIF so it doesn’t increase diversification, but it does sound like it would increase returns while also shifting half the portfolio towards less risk automatically.

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#2

After a whole year of PFC live hours, what I can tell you is that the other reason for TDIF’s is that they are somewhat diversified, due to being exposed to other markets than just the US as the S&P500 is and also the fact that the re-balancing occurs gradually as time passes by. Which lessens your risk as you get older and closer to your “retirement age” , since the opportunity of the market dropping drastically is always a potential, but if you are diversified in a TDIF and you have more bonds, that potential drop, would hurt less if you are closer or in your retirement.

Aside of what I said above, I also have been wondering if the TDIFs are still “too” conservatives or not, since I do see the bigger swings from the likes of the S&P500 indexes, so I guess this is where the 90/10 rule from Jeremy applies, put 90% of your portfolio into a TDIF and the 10% remaining play with it, see what works , give it sometime and then you can gradually move one to the other.

One other theory I have is that , I and maybe others, currently want to maximize any potential earnings as quick as possible, we get these ideas of just going all in on a different Index fund that is not a TDIF in hopes to get to our FI number faster, but it might fall into the “timing the market” category… so who knows, at the end its whatever makes you sleep at night that matters.

HTH

I forgot to include the always helpful PFC Graphic:

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