Can you hold two opposing views at the same time? I can. On the one hand, I believe that keeping it simple is often the right approach with your portfolio—and it doesn’t get much simpler than a Vanguard balanced fund. On the other hand, I am not a fan of lowest-common-denominator set-it-and-forget-it investment options, like the Target Retirement and LifeStrategy funds—see here.
Why am I willing to hold these opposing views? For one thing, Balanced Index’s (VBINX) 8.1% return over the 10 years ending in June 2022 would land near the top quartile of all U.S. college endowments—portfolios with access to the best institutional investors as well as the top venture capital and private equity managers on the planet. (Why 2022? Because the June 2023 data for college endowments won’t be available until later this year.)
In other words, three out of four college endowments could’ve improved their returns by owning the simplest of index funds. Of course, my Moderate Portfolio returned 8.9% over that 10-year period, placing it in the upper echelon among this competitive pool, as well.
So, simple can be extremely effective—but with a little effort, simple can be improved upon!
With my biases front and center, let’s round out last week’s Funds Focus covering Target Retirement and LifeStrategy funds with a review of Vanguard’s other balanced funds. In addition to analyzing each fund individually, I’ll walk you through some questions to ask when picking a balanced fund, compare the risk and reward profiles of these funds and discuss how many balanced funds to own.