VFIFX: Overview of Vanguard Target Retirement 2050 Fund

August 17, 2016 — 8:25 PM EDT

The Vanguard Target Retirement 2050 Fund ("VFIFX") started in June 2006 and has gathered $9.4 billion in assets under management (AUM). The fund's investment portfolio belongs to a life-cycle asset class, and it is a fund of funds. Its underlying Vanguard funds invest in equities and fixed-income securities whose allocation smoothly changes as the fund approaches its target date. The fund is intended to be a single-strategy investment holding for individuals who wish to retire around 2050. The fund is managed the Vanguard Group, a highly respected wealth management company in operation since 1975 and with about $3 trillion in global AUM. Vanguard is most known for its low-cost mutual funds and exchange-traded funds.

Investment Philosophy

The fund belongs to the family of Vanguard Target Retirement Funds, which provide a simple approach to retirement investing. The fund invests in Vanguard index funds that have broad diversification across thousands of domestic and foreign equities and fixed-income securities. It starts with a fairly aggressive asset allocation, favoring foreign and domestic stocks with an allocation of about 90%, while the remainder is invested in foreign and domestic bonds. As the fund approaches its target date, it starts gradually adjusting its asset allocation in favor of bonds, splitting its holdings 50/50 between stocks and bonds. As the fund goes beyond its target date, its portfolio continues tilting toward a more conservative allocation, with bonds and money market holdings dominating its assets. Unlike its peers, the fund firmly sticks to its glide path, rather than attempting to time markets.

Portfolio Composition

As of Jan. 31, 2016, the fund holds four Vanguard funds that result in an 89.75% allocation to stocks, a 10.03% allocation to bonds and a 0.22% allocation to short-term reserves. The fund invested 54% of its assets in the Vanguard Total Stock Market Index Fund Investor Shares ("VTSMX"), 36% in the Vanguard Total International Stock Index Fund Investor Shares ("VGTSX"), 6.9% in the Vanguard Total Bond Market II Index Fund Investor Shares ("VTBIX") and 3.1% in the Vanguard Total International Bond Index Fund Investor Shares ("VTIBX"). The fund's equity exposure is fairly well-diversified across various sectors, with no single sector having more than an 18% allocation of the total equity exposure, though its bond exposure is concentrated in U.S. government bonds and high-quality investment-grade corporate bonds.

Fund Management

The fund has been managed by William Coleman and Walter Nejman since 2013. Coleman has 10 years of investment experience, since he joined Vanguard in 2006. Nejman has 11 years of investment experience, since he began his financial career at Vanguard in 2005. The fund's asset allocation policies are supervised by Vanguard's investment counseling and research group, which brings expertise and research analysis to the fund's managers.

Investment Terms

The Vanguard Target Retirement 2050 Fund is a no-load fund, and it is one of the cheapest mutual funds in the target date 2046-2050 category. The fund has a net expense ratio of 0.16%, which is significantly lower than the average expense ratio of 0.45% for its peers with similar investment objectives. It requires an initial investment of at least $1,000.