New fund Can Help Young Investors Save For Retirement

June 23, 2010 - PRLog -- A registration statement has been filed with the U.S. Securities and Exchange Commission for Vanguard Target Retirement 2055 Fund, a broadly diversified fund that gradually shifts from aggressive to more conservative investments over the life of the fund. We anticipate that the fund will be available for investment in third-quarter 2010.

"Target-date funds now serve as the cornerstone of the retirement portfolios for many IRA holders and participants in defined contribution plans, and for good reason," said Vanguard Chairman and CEO Bill McNabb. "These funds provide a balanced, well-diversified investment program in a single and relatively straightforward vehicle that may suit the needs of many investors."

These funds are particularly beneficial in eliminating extreme behavior for many investors—either a nonequity portfolio, which may indicate an investment approach that is too conservative; or an all-equity portfolio, perhaps signaling an investment approach that is too aggressive. Target-date funds avoid these portfolio extremes by offering investors a balanced portfolio of stocks, bonds, and cash reserves, with risk levels varying by an investor's target-retirement date.

As with the existing Target Retirement Funds, the 2055 Fund will invest in other low-cost Vanguard index funds. The expense ratio of the new fund is expected to be 0.19%, similar to that of the other Vanguard Target Retirement Funds. The average industry expense ratio for the 2055 Fund's peer group is 1.17%, according to Lipper, Inc.

The original six Vanguard Target Retirement Funds were introduced in 2003: the 2005, 2015, 2025, 2035, and 2045 funds, and an income fund. In 2006, Vanguard launched an additional five funds: 2010, 2020, 2030, 2040, and 2050.

Vanguard Target Retirement Funds have gained rapidly in popularity since first being introduced, as measured by both asset growth and investor adoption. Vanguard target-date funds had garnered $64 billion in net assets as of April 30, 2010, leading the industry for the past three years with $41 billion in cash flow (source: Strategic Insight).

Target-date funds are broadly diversified, professionally managed funds. The year in the fund name refers to the approximate year (the target date) that an investor would expect to retire. A target-date fund gradually shifts its emphasis from more aggressive investments to more conservative ones over the life of the fund. Investments in target-date funds such as Vanguard Target Retirement Funds are subject to the risks of their underlying funds. An investment in a Target Retirement Fund is not guaranteed at any time, including on or after the target date, visit www.vanguard.com,

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