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» Target Date Funds Miss The Mark
Here is an article from Fortune Magazine discussing how most target date funds were overly aggressive and invested too heavily in equities for investors who were close to retirement and not prepared for what happened last year. These types of funds are highly popular in 401k plans. The problem is this…these are sold with the assumption that at the date you are expected to retire that the fund becomes significantly less aggressive to preserve capital. No discussion is being had regarding the risk level in the fund at retirement. These funds are managed on a “flight path” meaning there is no real formula to how these are managed. This so called “flight path” subjects investors to the speculation and gambling that runs rampant through the industry already. These are not designed using specific asset classes to manage the risk/return preference of the investor. Some of the most devastating news about this is that people expecting to retire next year had their portfolios hurt just as significantly as others who were much younger. That is ok as long as they had the proper understanding of risk in their portfolio or fund. Unfortunately, that was not the case. What is also not being discussed in this article is the fact that the bond or fixed (safe) portion of the portfolio lost almost as much as the equity portion in some of these funds. Check out this video link that discusses it further http://www.markmatson.tv/?p=389.
