Vanguard made two big announcements this week.
First, their new Total International Bond Index Fund (which has been in the works since at least 2011) is expected to be open to investors by June of this year.
Second, they’re making two changes to their funds-of-funds:
- They’re adding the new international bond fund to each of the Target Retirement and LifeStrategy Funds (and to two of the three Managed Payout funds), and
- The Target Retirement funds that own TIPS (so, as of right now, Target Retirement Income, Target Retirement 2010, and Target Retirement 2015) will be switching from the intermediate-term TIPS fund to the short-term TIPS fund.
The Total International Bond fund is the topic for Monday, so we’ll be talking more about those changes shortly.
Regarding TIPS, it was purely by coincidence that we discussed the differences between the two TIPS funds this last Monday. If you read that article can probably guess my conclusion: The change is not a big deal. It should very slightly reduce the expected return and volatility of those three Target Retirement funds.
I say “very slightly” because the TIPS holdings for these funds range from just 5% to 20% of the portfolio. So this is a change, of a modest portion of the portfolio, from one type of inflation-protected Treasury bond to another type of inflation-protected Treasury bond.
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Thanks for reading!