Archives for July 5, 2016

Morningstar Target Date Fund Comparisons: Vanguard, Fidelity, T. Rowe Price

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Target Date Funds (TDFs) get their name because they adjust their portfolio holdings automatically over time based on a given target retirement date. The overall growth of TDF assets continues, especially within employer-based 401(k) and 403(b) retirement plans. Morningstar recently released its 2016 research study called 2016 Target-Date Fund Landscape:

After laying out a general overview of the target-date industry, this year’s report highlights analysts’ best practices in comparing and contrasting target-date series according to Morningstar’s ratings pillar framework, demonstrating the benefits of going beyond conventional evaluation practices.

I found the report full of interesting statistics and insights, but at 84 pages it is also rather long. Here are what I consider the highlights.

The Big 3 providers are still Vanguard, Fidelity, and T. Rowe Price. As you can see below, they combine for 70% of all TDF assets. This number is actually slightly lower than three years ago, however. Vanguard is the current leader, taking over Fidelity’s spot.

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All Target Date Funds are NOT created the same… Consider the huge gap in possible equity percentages vs. time (glide path).

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…but the Big 3 TDFs are all relatively similar. Before retirement age, the glide paths are very close. They start to differ more significantly after the retirement target year.

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Vanguard leads the way with the highest total assets, lowest expense ratio, and the only Gold Morningstar Analyst Rating. You can feel the effect of Vanguard in that the average asset-weighted expense ratio has decreased industry-wide every single year since 2009. You can bet that this wouldn’t be the case of Vanguard wasn’t so successful.

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We personally have access to T. Rowe Price and Fidelity TDFs in our respective 401k plans, although we don’t own shares of either. I would recommend my own family to buy the Vanguard Target Retirement family of funds. If you own one of the lesser-known TDF families, I would download the Morningstar paper and see how it compares. You may be surprised by the inner workings.

Chase Freedom 10% Back on Hotels and Car Rentals via Ultimate Rewards

The Chase Freedom credit card has a new special promotion offering 10% cash back on up to $2,500 in combined hotel and car rental purchases made through Chase Ultimate Rewards in July. Details:

  • The purchases must be made July 1–31, 2016.
  • Your actual travel dates can be any time.
  • Applies only to hotels and car rentals booked through ChaseUltimateRewards.com.

In general, ChaseUltimateRewards.com offers prices that are comparable to Expedia, Travelocity, Orbitz, etc. Hotel prices do vary more than airfare, so I would still comparison shop side-by-side. Note that their hotel room quotes include taxes, which some other sites (like Expedia) add in very late in the checkout process. Also, I found how they listed rooms by TripAdvisor rating to be interesting.

This is addition to the quarterly 5% cash back category, which currently includes Restaurants and Wholesale Clubs (Costco, Sam’s Club, BJ’s).

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