Retirement to Date Funds

Yesterday I finished updating my portfolio as I recommended in my September 4th blog. It was just in time for the big run-up today. As I write this, I am strategizing for the next move. I suspect that it will occur sometime in early January, but it is too early to really pin point. In the meantime I will give in to market forces. When doing my re-balancing, I considered getting out of my "retirement to date" (RTD) funds that I have with Vanguard (2020 & 2030). To make that determination, I did some analysis that ended up being very interesting. One of the actions I considered was to go up the risk scales with the RTD funds from 2020 to 2050. I have a bullish opinion for the short term future and was weighting taking on more risk. Something I felt was very interesting surfaced. I looked at all the Vanguard RTD funds from 2005 to 2050 and set a price as of April 2009 or basically the bottom of the market. Then I took the closing price on Oct 4th 2010 or a period of about 18 months. The result was as follows........ Fund % increase from 4/09 2005 - 20% / 2010 - 24% / 2015 - 26% / 2020 - 28% / 2025 - 30% / 2030 - 32% / 2035 - 34% / 2040 - 34% / 2045 - 34% / 2050 - 34% / Note: Percentages are approximate and strictly price movement. What surprised me was that the returns from 2005 to 2035 were what I expected. Slightly higher as your target retirement date was farther and farther away. But, from 2035 to 2050, the returns were the same. Thus, taking additional risk did not pay off and if you were in the 2035 you maximized your returns for these types of investments. Will this occur in the future ? Will, the economies of the world act the same way as they have for the past 18 months ? Now, guess what the change in the Dow Index was over the same period ? You guessed it 34%......In the end I didn't make any changes as these amounts were a relatively small part of my total portfolio. You make the call as to whether these investment are worth it for you !