TRRDX
2040 TRPrice Retirement
Strategic Asset Allocation for 2040 Retirees
The 2040 TRPrice Retirement Fund (TRRDX) is designed to cater to investors targeting retirement around the year 2040. This fund aims to provide a balanced approach to capital growth and income, making it an attractive option for those looking to secure their financial future. With a strategic asset allocation that includes a significant portion in U.S. equities (59.56%) and non-U.S. equities (28.06%), the fund is well-positioned to capture growth opportunities in both domestic and international markets. Additionally, the fund maintains a conservative allocation in bonds (8.83%) and cash (3.03%), providing a cushion against market volatility. This diversified approach is intended to balance risk and reward, aligning with the long-term investment horizon of its target audience.
At A Glance
Executive Summary
TRRDX offers a balanced approach for 2040 retirees with a 0.6% expense ratio and diverse asset allocation, focusing on growth and income.
Balanced growth and income strategy; Diversified asset allocation; Suitable for 2040 retirees.
Higher expense ratio than some peers; Negative alpha and Sharpe ratio; Recent underperformance against benchmark.
Performance Analysis: Navigating Market Volatility
TRRDX has demonstrated a mixed performance over various time frames. Over the past year, the fund achieved a notable return of 26.36%, reflecting its ability to capitalize on market upswings. However, when compared to its benchmark, the S&P 500 Total Return Index, which posted a 37.62% return, TRRDX underperformed. This discrepancy is further highlighted by the fund’s negative alpha of -11.30%, indicating that it has not added value over the benchmark on a risk-adjusted basis. The fund’s beta of 0.78 suggests lower volatility compared to the market, which may appeal to risk-averse investors. Despite these challenges, the fund’s long-term annualized returns remain competitive, with a 10-year return of 8.92% and an inception return of 9.24%.
Sector Allocation: Emphasizing Technology and Financials
The sector allocation of TRRDX reveals a strong emphasis on technology (22.78%) and financials (14.52%), sectors that have historically driven market growth. This strategic focus aligns with the fund’s objective of capital growth, as these sectors are often at the forefront of innovation and economic expansion. Health care (13.43%) and industrials (10.67%) also represent significant portions of the portfolio, providing exposure to essential and cyclical industries. The fund’s allocation to real estate (4.72%) and utilities (2.08%) offers additional diversification, potentially enhancing stability during economic downturns. This sector diversification is designed to mitigate risks associated with overexposure to any single industry, supporting the fund’s balanced growth strategy.
Comparative Analysis: Expense Ratio and Yield
When compared to similar target date funds, TRRDX’s expense ratio of 0.6% is relatively higher, which may be a consideration for cost-conscious investors. For instance, the 2045 GuideStone MyDestination-Inv (GMFZX) and 2060 Victory Target Retirement (URSIX) funds offer lower expense ratios of 0.72% and 0.64%, respectively. Despite this, TRRDX provides a competitive yield of 1.30%, which is comparable to its peers, such as GMFZX’s 1.47% and URSIX’s 1.45%. This yield is an attractive feature for investors seeking income alongside capital appreciation. The fund’s higher expense ratio may be justified by its active management strategy and diversified asset allocation, which aim to optimize returns over the long term.
Risk Metrics: Understanding Volatility and Drawdowns
TRRDX’s risk metrics provide insight into its volatility and potential for drawdowns. The fund’s standard deviation of 2.99% indicates moderate volatility, while its beta of 0.78 suggests it is less volatile than the broader market. However, the fund’s negative Sharpe ratio of -1.09 and Treynor ratio of -14.54 highlight challenges in achieving risk-adjusted returns. The maximum drawdown of -6.7% experienced between July and August 2024 underscores the fund’s vulnerability to market downturns. Despite these risks, the fund’s downside risk (UI) of 1.56% is relatively low, suggesting a limited potential for significant losses. Investors should weigh these risk factors against the fund’s growth potential and diversification benefits when considering TRRDX for their portfolio.
Top Holdings: A Focus on T. Rowe Price Funds
The top holdings of TRRDX are predominantly T. Rowe Price funds, reflecting a cohesive investment strategy within the T. Rowe Price family. The largest allocations include T. Rowe Price Value Z (14.36%) and T. Rowe Price Growth Stock Z (13.25%), which provide exposure to value and growth equities, respectively. Other significant holdings include T. Rowe Price Equity Index 500 Z (9.57%) and T. Rowe Price US Large-Cap Core Z (9.49%), offering broad market exposure. The inclusion of international stocks, such as T. Rowe Price Overseas Stock Z (7.14%) and T. Rowe Price International Value Eq Z (6.89%), enhances the fund’s global diversification. This focus on T. Rowe Price funds ensures a consistent investment philosophy and management approach, which may appeal to investors seeking a unified strategy.
Market Cap Allocation: Emphasizing Large and Extra-Large Caps
TRRDX’s market cap allocation is heavily weighted towards large (26.29%) and extra-large (33.36%) cap stocks, reflecting a preference for established companies with strong market positions. This allocation strategy is designed to provide stability and consistent returns, as large-cap stocks are typically less volatile and more resilient during economic downturns. The fund also includes medium (20.70%) and small (5.53%) cap stocks, offering growth potential through exposure to emerging companies. This balanced approach to market cap allocation supports the fund’s objective of achieving capital growth while managing risk. Investors seeking a blend of stability and growth may find this allocation strategy appealing, as it leverages the strengths of both large, established firms and smaller, high-growth opportunities.
Conclusion: A Balanced Option for Long-Term Investors
In conclusion, the 2040 TRPrice Retirement Fund (TRRDX) offers a balanced investment strategy for individuals planning to retire around 2040. With its focus on both capital growth and income, the fund is well-suited for investors seeking a diversified portfolio that can adapt to changing market conditions. While the fund’s recent performance has lagged behind its benchmark, its strategic asset allocation and sector diversification provide a solid foundation for long-term growth. The fund’s higher expense ratio may be a consideration for some investors, but its active management and comprehensive approach to asset allocation justify the cost for those prioritizing a well-rounded investment strategy. Overall, TRRDX is an attractive option for investors looking to balance growth and income as they approach retirement.
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Futher Reading
https://finance.yahoo.com/quote/TRRDX/”>Yahoo: 2040 TRPrice Retirement
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