RAETX
2030 American Funds Trgt Date Retire-R1
Strategic Asset Allocation for 2030 Retirees
The 2030 American Funds Trgt Date Retire-R1 (RAETX) is designed for investors planning to retire around the year 2030. This target-date fund aims to balance growth, income, and capital conservation as it approaches its target date. The fund achieves its objectives by investing in a diversified mix of American Funds, which are known for their robust management and strategic asset allocation. As the fund nears its target date, it gradually shifts its asset allocation to become more conservative, reducing exposure to equities and increasing holdings in bonds and cash. This strategic shift is intended to protect investors’ capital while still providing opportunities for growth and income.
At A Glance
Executive Summary
RAETX offers a diversified portfolio for 2030 retirees, focusing on growth and income with a 1.42% expense ratio and 1.17% yield.
Pros:
- Diversified asset allocation for balanced growth and income; Managed by American Funds, a reputable fund family; Suitable for investors planning to retire in 2030.
Cons:
- Higher expense ratio compared to peers; Lower recent performance relative to benchmark; Negative risk metrics indicating potential volatility.
Performance Analysis: A Mixed Bag
RAETX has shown a mixed performance over various time frames. Over the past year, the fund delivered a return of 19.72%, which is commendable but falls short when compared to its benchmark, the S&P 500 Total Return Index, which returned 37.62% in the same period. The fund’s five-year annualized return stands at 7.00%, while its ten-year return is 6.55%. These figures suggest that while the fund has been able to generate steady returns over the long term, it has struggled to keep pace with the broader market in recent years. This underperformance relative to the benchmark may be a concern for investors seeking high growth.
Expense Ratio: A Consideration for Cost-Conscious Investors
One of the critical aspects of RAETX is its expense ratio, which stands at 1.42%. This is relatively high compared to similar funds in the target-date category, such as the 2030 TRPrice Retirement-R (RRTCX), which has an expense ratio of 0.0106%. High expense ratios can erode returns over time, making it an important consideration for cost-conscious investors. While the fund offers a diversified portfolio and professional management, investors need to weigh these benefits against the cost of investing in the fund. For those prioritizing low-cost investment options, RAETX may not be the most attractive choice.
Portfolio Composition: A Diverse Mix of Holdings
RAETX’s portfolio is composed of a diverse mix of holdings, with significant allocations in both equities and bonds. The fund’s top holdings include American Funds American Balanced R6 (RLBGX), American Funds American Mutual R6 (RMFGX), and American Funds Capital World Gr&Inc R6 (RWIGX), among others. The sector allocation is heavily weighted towards technology (23.89%), health care (14.11%), and industrials (13.10%), reflecting a balanced approach to sector exposure. On the bond side, the fund holds a mix of government (28.42%) and securitized bonds (35.88%), providing a stable income stream. This diversified approach helps mitigate risk and provides a balanced growth potential.
Risk Metrics: Navigating Volatility
RAETX’s risk metrics indicate a challenging environment for the fund. With an alpha of -17.94% and a Sharpe ratio of -2.40, the fund has struggled to generate returns above the risk-free rate, adjusted for volatility. The beta of 0.52 suggests that the fund is less volatile than the market, which can be beneficial in turbulent times. However, the negative Treynor ratio of -34.26 and the downside risk (UI) of 1.11 highlight potential vulnerabilities. These metrics suggest that while the fund may offer some protection against market downturns, it has not been able to capitalize on market upswings effectively.
Comparative Analysis: How RAETX Stacks Up
When compared to similar funds, RAETX presents a mixed picture. For instance, the 2030 TRPrice Retirement-R (RRTCX) has a higher one-year return of 21.34% and a lower expense ratio of 0.0106%, making it a more attractive option for some investors. Similarly, the 2035 American Funds Trgt Date Retire-R2 (RBFTX) and 2035 American Funds Trgt Date Retire-R1 (RAFTX) both offer higher returns and lower expense ratios. These comparisons highlight the importance of evaluating fund performance and costs relative to peers. Investors should consider these factors when deciding whether RAETX aligns with their investment goals.
Investor Suitability: Who Should Consider RAETX?
RAETX is particularly suitable for investors who are planning to retire around 2030 and are looking for a fund that offers a balanced approach to growth and income. The fund’s strategic asset allocation, which becomes more conservative as the target date approaches, is ideal for those seeking to protect their capital while still benefiting from market growth. Managed by American Funds, a reputable fund family, RAETX provides a level of trust and reliability. However, investors should be mindful of the fund’s higher expense ratio and recent underperformance relative to its benchmark, which may not align with the goals of those seeking aggressive growth or low-cost investment options.
Conclusion: Balancing Growth and Income for 2030 Retirees
In conclusion, the 2030 American Funds Trgt Date Retire-R1 (RAETX) offers a well-rounded investment option for those nearing retirement in 2030. With its diversified portfolio and strategic asset allocation, the fund aims to balance growth and income while conserving capital. However, its higher expense ratio and recent performance challenges relative to the benchmark may deter some investors. For those who value professional management and a reputable fund family, RAETX remains a viable option. Ultimately, investors should carefully consider their individual retirement goals and risk tolerance when deciding if RAETX is the right fit for their portfolio.
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RAETX: 2030 American Funds Trgt Date Retire-R1 | Target Date Investment for 2030 Retirees
RAETX offers a diversified portfolio for 2030 retirees, focusing on growth and income with a 1.42% expense ratio and 1.17% yield.
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Futher Reading
https://www.morningstar.com/funds/xnas/RAETX/quote
https://finance.yahoo.com/quote/RAETX/”>Yahoo: 2030 American Funds Trgt Date Retire-R1
https://ftcloud.fasttrack.net/web/chart/RAETX
https://www.wsj.com/market-data/quotes/mutualfund/RAETX
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