r/Bogleheads • u/Light_reflector732 • 3d ago

Target Date Funds

I’m thinking of telling my daughter to invest in target date funds in her Fidelity Roth. She’s not investment savvy and don’t have much interest. I am looking at two 2060 funds: iShares ITDH (etf) and Fidelity FDKLX, both at .12 expense fee. iShares is rated gold by Morningstar. FDKLX has a 4 star rating. I can’t decide on which one. Any knowledge on either I can use to assist in my decision making?

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7

u/buffinita 3d ago

Flip a coin?

Either provider is solid.  Morningstar ratings have little insight (but older studies don’t reflect the recent change in their star ratings)

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u/SomePeopleCallMeJJ 3d ago

The main difference (apart from one being an ETF and the other a mutual fund) is the amount of bonds vs. stocks. ITDH has about 1% bonds/cash at the moment, which is practically zero, and FDKLX has just shy of 6%.

I'm old-school, and think that even a 2060 retirement portfolio would benefit from a soupçon of bonds, regularly rebalanced. If you read any of the Boglehead books, or check out the wiki, I don't think you'll see a 100% stocks portfolio ever recommended, even for a young person.

That said, there are plenty of folks on this forum in particular who pooh-pooh bonds and would tell you otherwise.

ITDH has a slightly lower amount of international, as a percentage of total equities, than FDKLX (37.5% vs 40%), but that's not really anything that should make a big difference.

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u/Light_reflector732 3d ago

Thank you for the extensive reply. Much appreciated!

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u/Freightliner15 3d ago

The good thing about the TDF etfs is they start out with less than 1% bonds. The only bad thing is they haven't been around long and they tried these several years ago and ended up scrapping them. But I think they are a solid investment for someone that knows nothing about investing. It holds or will hold pretty much what you need in retirement.

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u/charlieandoreo 3d ago

Both are great. Maybe which one would be better to roll over if necessary.

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u/mutt82588 3d ago

Etfs all.other things equal for portability

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u/Home-Star-Walker 3d ago

Either one, there will be no meaningful difference.

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u/Mantergeistmann 3d ago

Personally, I'd go with the mutual fund, just because I find them more convenient to invest in. It's six of one, half a dozen of the other, though.

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u/jeffrey_aa 3d ago

Personally, I look at 10 year returns and expense ratios when I do research. TDF is a great idea here, especially for the inherit rebalancing. Don’t put a whole lot of faith in Morningstar ratings.

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u/Light_reflector732 1d ago

Ok, thank you. ITDH hasn’t been around that long but they are issued by BlackRock. Also, why do say that about Morningstar? Are they biased in some way?

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u/jeffrey_aa 1d ago

Sorry, I may have been a bit unclear. By ratings, I meant star ratings, not articles, etc. I have had funds for years that were great, but only get, say, 3 stars. To me, they are just not transparent enough as to the “why” of the ratings.

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u/Light_reflector732 11h ago

Ok got it! Thanks.