Vantagepoint Milestone Funds “Age” Their Portfolios

Retirement investing doesn’t have to be so difficult, time-consuming or confusing to prevent investors from building for a secure retirement. New investment fund options are available in most plans that remove much of the mystery of investing and place the day-to-day operation in the hands of professionals. The need for these funds is clear. Rather than “deal with” the management of their retirement funds, investors may place too much of their money in the most conservative funds, risking the possibility that they will not have enough assets available when they decide to retire.

Alternatively, some investors become frustrated with their current investment allocation and try to time the market, moving from lower-performing funds, just before a turnaround, or moving into high-performing funds, just before they fall out of favor.

Celebrating its first anniversary this year, the Vantagepoint Milestone Funds have proven to be a popular choice among investors who have a clear idea when they will need their retirement assets but a less focused view of how to reach their retirement goals.

Here’s how the Milestone Funds work: Each of the seven Milestone Funds has a target date for its maturity. Investors choose which fund to invest in based on when they want to begin withdrawing the assets. ICMA-RC investment professionals select a combination of Vantagepoint funds appropriate for the time remaining until the “target retirement date.” As time elapses, each Fund’s allocation to equity funds is decreased and the fund’s allocation to fixed income funds is increased. On October 30, 2007, a multi-strategy fund was added to the Fund to seek to offer additional diversification beyond those investments in the fixed income and equity funds. An investor should consider the investment objectives, risks, and charges and expenses before investing.

The Aging Path: Each fund, regardless of target year, reduces its equity exposure over time.

For example, the Milestone 2025 Fund may be appropriate for investors intending to begin withdrawing from their retirement plans close to 2025. This approach provides built-in diversification among the underlying Vantagepoint Funds and asset classes, which can help reduce risk. The allocations in the fund are automatically rebalanced, so that the assets maintain their risk level despite the up and down movements of the markets.

ICMA-RC investment professionals periodically reallocate the assets among the underlying individual mutual funds, moving a greater percentage of each Milestone Fund from the more volatile equity and international funds to more predictable income-generating fixed income (bond, money market) funds. The adjustments help keep the portfolio focused on investors’ retirement goals with an appropriate investing risk level. On October 30, 2007, a multi-strategy fund was added to all of the Milestone Funds except the Milestone 2040 fund, to promote competitive performance and assist in lowering volatility risk.

The Milestone Retirement Income Fund is designed to provide investors with appropriate risk and income earning levels during the years they will be withdrawing funds. Further portfolio “aging” is not necessary for the Retirement Income Fund to maintain the targeted level of risk and income appropriate if funds will be withdrawn over several years.