A reader writes in, asking:
“I’m curious if you are still using the LifeStrategy fund? Are you satisfied or do you have second thoughts?”
Yes, we’re still using Vanguard’s LifeStrategy Growth fund for our retirement savings. And yes I am still quite happy with it — precisely because I don’t have second thoughts. I think about it roughly the same way that I think about a savings account — not in the sense that it has the same risk/reward profile, because it most certainly does not, but in the sense that it takes a similar amount of maintenance and mental energy (i.e., none).
I no longer spend any time or mental energy thinking about:
- Whether or not now is a good time to rebalance,
- Which fund(s) my monthly contributions should go into, or
- Whether my asset allocation is precisely right.
I know my allocation is not perfect. But by using an all-in-one fund, I forced myself to accept that ahead of time. And because it requires no maintenance, there is no longer the monthly temptation (which used to occur when making new contributions) to change something here or there in an attempt to make the portfolio slightly better in some way.
Of course, all-in-one funds are not a perfect fit for everybody. There are plenty of reasons why any given investor might be better off taking the DIY-allocation approach. For example:
- The fund-of-funds structure is tax-inefficient, which is relevant if you have assets in a taxable brokerage account.
- Some people will not be able to find an all-in-one fund with an asset allocation that suits their needs (e.g., because they need to underweight U.S. stocks in their IRA in order to make up for the fact that they’re overweighting U.S. stocks in their 401(k) because their retirement plan’s only decent choice is a U.S. stock fund).
- Some people will prefer to implement a strategy that “tilts” the portfolio in some way (most commonly toward small-cap value stocks or REITs).
- Some people using an all-in-one fund would still worry about whether the allocation is good enough.
- And some people with DIY allocations don’t worry about whether their allocation is good enough.
But, yes, our all-in-one fund is continuing to work quite well for us.