Reply to Vanguard Target Date funds (in taxable accounts) --- WHAT IS GOING ON?

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Reply to "Vanguard Target Date funds (in taxable accounts) --- WHAT IS GOING ON?"

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[quote=Anonymous]Op here.

This isn't a flaw of Target Date funds.  Any fund that has an identical "institutional" fund could end up in the same position.  Vanguard knowingly  lured a huge share of investors out of the regular fund, instigating a need for a huge sell off, and thereby triggering an unprecedented tax liability for the small minority of investors who weren't eligible for the perk of transferring to the institutional fund.

Dropping the entry ticket for the institutional fund from $100mil all the way down to $5mil, was obviously going to severely reduce the number of investors in the regular fund...to their detriment.

This could happen in the Vanguard S&P 500 fund, the Energy Fund, the Large Cap gund, ...literally ANY fund that has a twin version for institutional investors.  No one thought Vanguard would make such a huge change...but we now see that they will screw over the "small" investor in favor of larger investors.

I'm trying to make lemonade out of this...the upside being that I'm now at a point in one fund where we could sell the whole tjing today, transfer to ETFs, and not have to pay any (additional) tax.  The tax hit from Vanguard's cash out has cometely covered all the taxes I'd owe on my fund.  I'm essentially at cost basis now because Vanguard "realized" all my previously unrealized gains.  So, since we are already are forced to pay all the capital gains....might as well consider my options.

There's little chance that Vanguard would have the same thing happen with their Target Date funds again because they lowered the entry for institutional funds down to $5mil, there's no room for them to go lower and take more investors out of the regular target date fund (that I'm currently in).  BUT, they could start messing with the underlying funds (total stock market fund, international fund, bond fund) and cause additional (albeit less severe) pain.  Who trusts Vanguard now?   Not me![/quote]

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