Target date retirement funds are simple, automated, easy.
The problem? What’s simple might not be optimal.
Investment expert Paul Merriman joins us to discuss the two-fund portfolio, a mix of one target date fund and one small cap value fund. He describes why this could be the ultimate portfolio for buy-and-hold investors who want to boost their returns, without excessive complexity or risk.
Here’s the idea behind a two-fund portfolio:
- Your age x 1.5 = the percentage of your portfolio in a target date fund
- Invest the rest in a small cap value fund
According to Merriman, this simple strategy could dramatically improve long-term aggregate returns without creating too much volatility or complexity.