Feng Shui Your Financial House — Day 21

📆 𝐃𝐚𝐲 𝟐𝟏’𝐬 𝐭𝐚𝐬𝐤 𝐢𝐬 𝐭𝐨 𝐮𝐬𝐞 𝐚 𝐭𝐚𝐫𝐠𝐞𝐭 𝐝𝐚𝐭𝐞 𝐟𝐮𝐧𝐝 𝐚𝐬 𝐚 𝐛𝐞𝐧𝐜𝐡𝐦𝐚𝐫𝐤.

If you have an investment portfolio, compare its composition to a target date fund with your retirement date from Vanguard or Fidelity.

If you’re a non-U.S. investor, pick one from a well-respected institution. In this case, you want big, stable, and boring.

A target date fund’s asset allocation (what it’s invested in) represents good, solid, middle-of-the-road conventional wisdom. As the fund gets closer to its target date, it becomes more conservatively invested, i.e., weighted more towards bonds than go-go growth stocks.

𝐀 𝐭𝐚𝐫𝐠𝐞𝐭 𝐝𝐚𝐭𝐞 𝐟𝐮𝐧𝐝 𝐢𝐬 𝐚 𝐠𝐨𝐨𝐝 𝐲𝐚𝐫𝐝𝐬𝐭𝐢𝐜𝐤 𝐟𝐨𝐫 “𝐧𝐨𝐫𝐦𝐚𝐥.”

No one gets fired for having the asset allocation of a target date fund. It’s conservative and by the book, at least as implemented by the Big Guys.

For this reason, this is a good way to gauge where your portfolio might be taking outsized risks, either by being too aggressive/too conservative or too diversified/too concentrated.

Does your portfolio look very different? How so? What are the implications of those differences? If you don’t know, find out.