Why Target-Date Funds Might Not Be For You
Contributing columnist, Alexandra Deluise
Target-date funds are one of many popular retirement fund solutions that are worth considering as you plan your future. However, as with all retirement options, target-date funds should be approached with caution and a healthy dash of education. By understanding what target-date funds are, as well as the pros and cons of investing in such a fund, you might find that target-date funds aren’t a good fit for your investing style and retirement goals.
As with most investments there’s no perfect answer to the question, “Are target date funds good or not?” Read on to find out if target date funds are good or bad-for you.
What are Target-Date Funds?
Target-date funds are investment plans with a specific end date in mind. In the case of retirement, a target-date fund would be set with an end date that corresponds to your retirement goals. A 30-year-old in 2015 with a retirement goal of age 65 would set a target date of 2050, for instance.
The handy thing about target-date funds is that they automatically change your asset allocations to an appropriate combination of stocks, bonds, and other investments based on how far in the future the target date is. Of course, as with all investments, there are risks: you are not guaranteed growth on your investments, and your asset values will fluctuate. However, these target-date funds are designed to give you the best chance at having the necessary growth to meet your retirement goals.