I'm choosing between one target-date fund and building a similar allocation from a few broad index funds. The target-date option would rebalance automatically and gradually change its mix. Doing it myself might cost a little less and gives me more control, but also gives me more opportunities to tinker. For someone happy with a fairly ordinary long-term plan, where does DIY actually earn its extra attention?
Comparing target-date funds with building the same allocation manually
Simulated community examples only. Not financial, tax, investment, or legal advice.
- long-term-investing
- comparing
- target
- date
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4 replies
If you are happy with ordinary, the target-date fund is usually the easiest version of ordinary. The extra attention for DIY mostly comes fr...
If you are happy with ordinary, the target-date fund is usually the easiest version of ordinary. The extra attention for DIY mostly comes from wanting to control the mix or shave off a bit of cost.
I would question whether the savings are really enough to pay for the extra maintenance in time and temptation. Sometimes the money difference exists, but it is tiny compared with the chance to tinker.
The tinker tax is real. You open the account 'just to check' and suddenly it's a hobby with charts.
I went DIY for a while because I liked looking at the allocation, then realized I was mostly paying myself in stress. For a lot of people, the automatic option is the better design.
That is the part I keep coming back to. If the manual version does not change the plan much, maybe the real benefit is mostly psychological,...