The annual total return of Vanguard Target Retirement 2025 Fund as ranked in its Morningstar" peer group is indicated in the years 2012 through 2021. Only funds with a minimum 12-month history are included in the annual peer group results. The number of funds in the annual rankings range from 130 in 2012 to 225 in 2021. Only the 130 funds with a minimum 10-year history are included in the 10-year annualized total return result. The Morningstar 2025 peer group was chosen because it is larger and has a longer track record than most other TDF vintage peer groups. Visit the Vanguard Target Retirement 2025 Fund for more information.
Sources: Vanguard and Morningstar, as of December 31, 2021.
Note that the competitive performance data shown represent past performance, which is not a guarantee of future results, and that all investments are subject to risks. For the most recent performance, visit our website at www.vanguard.com/performance. There may be other material differences between products that must be considered before investing.
Figure 1 illustrates the value of this approach with the performance and associated Morningstar peer-group ranking of Vanguard Target Retirement 2025 Fund in each of the last 10 years. Our prudent asset allocation strategy means that yearly peer performance rankings typically landed around the second quartile. This consistency translated into a 10-year annualized total return that ranked in the top quartile.
Figure 2. A history of consistently strong risk-adjusted performance
Notes: Standard deviation was used for annualized risk. Results will vary for other time periods. All funds in the Morningstar peer group with a minimum 3-, 5-, or 10-year history, respectively, were included in the comparison. There may be other material differences between products that must be considered before investing. Note that the competitive performance data shown represent past performance, which is not a guarantee of future results, and that all investments are subject to risks. Investment returns and principal value will fluctuate, so investors' shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data cited. For the most recent performance, visit our website at vanguard.com/performance.
Sources: Vanguard and Morningstar, Inc., as of March 31, 2022. Vanguard Investor Shares highlighted.
To expand on this idea, Figure 2 presents another perspective on the benefit of Vanguard's risk-controlled approach. The graph shows relative performance over 3-, 5-, and 10-year periods, with risk measured on the horizontal axis and annualized returns on the vertical axis. We focus on the risk-adjusted returns because it's important to be rewarded over time for the age-appropriate risk level of a portfolio. Risk-adjusted returns are also the most useful measure for comparing funds because they tell you whether a particular fund is taking on unnecessary risk to generate a higher total return.
Note that Figure 2's red dots represent Vanguard vintages, while the other scattered dots represent the rest of the TDF peer group. While the performance of other TDFs varies from above average to below average along the time axis, the performance of Vanguard Target Retirement Funds remains in the upper echelon.
Three vintages in our Target Retirement Fund suite—the Target Retirement Income, 2025, and 2050 funds—represent a useful cross-section to examine, as they show key points along the glide path. Each fund has a track record of 15 years or longer. Each fund ranked in the top quartile of its performance rankings against its Morningstar peer group for 10-year rolling periods from near their inception to the end of 2021. Averaging out their rankings over those rolling periods, each fund outperformed its peer-group average 100% of the time.1
Short-term consistency, long-term outperformance
In short, the runner training for a marathon needs to know how to keep a sustainable pace to reach the goal in the targeted time frame. Outperforming a peer group most of the time in the short run while staying within a prudent target asset allocation raises the chance of notable outperformance in the long term.
Our Target Retirement Fund series launched in 2003, making them among the earliest TDFs to be index based. They've navigated many different market environments—good, bad, and everything in between—and through it all, year in and year out, our fund suite has provided a consistent experience for our investors. This kind of long-term performance track record can provide plan sponsors with the confidence that Vanguard Target Retirement Funds remain a proven way to position participants for retirement readiness and financial well-being.
¹The three vintages were chosen because they represent scenarios for those who are well into retirement, those nearing retirement, and those further from retirement, and because each fund has a track record of at least 15 years. The analysis reviewed 10-year returns on a rolling quarterly basis from June 30, 2006, through December 31, 2021. Only competing funds with a 10-year history for the relevant period were included. For the Income Fund, the number of funds in the peer group ranged from 35 in the earliest periods to 110 in the most recent periods; for the 2025 Fund, from 10 to 130; and for the 2050 fund, from 26 to 131. Vanguard Target Retirement Income Fund ranked in the top quartile 74% of the rolling 10-year periods (17 out of 23 periods) and outperformed the peer-group average in all those 10-year periods. Vanguard Target Retirement 2025 Fund ranked in the top quartile 87% of periods (20 out of 23) and outperformed the peer-group average in all those periods. Vanguard Target Retirement 2050 Fund ranked in the top quartile 65% of periods (15 out of 23) and outperformed the peer-group average in all those periods. Results vary with different time periods. Sources: Vanguard and Morningstar, Inc., as of December 31, 2021. Note that the competitive performance data shown represent past performance, which is not a guarantee of future results, and that all investments are subject to risks. For the most recent performance, visit our website at vanguard.com/performance.