Why Target-Date Funds Are Off-Target for Many Investors

Target-date funds might be a bigger gamble than you're willing to take. Folio Investing offers portfolios with different levels of risk.

Analysts once called companies like General Electric and Xerox “one-decision stocks”—buy ’em and forget ’em, then reap the benefits years later. Today, target-date mutual funds are one-decision retirement plans. But just like simple solutions to other complex problems, they have pitfalls. I’m not against these funds, but most are far from perfect.

Still, at a time when investors are turned off by stock mutual funds, it’s no surprise that target funds are outrageously popular. With a single purchase, investors have an amazingly handy way of constructing an evolving lifetime port­folio—in many cases, one with low fees.

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James K. Glassman
Contributing Columnist, Kiplinger's Personal Finance
James K. Glassman is a visiting fellow at the American Enterprise Institute. His most recent book is Safety Net: The Strategy for De-Risking Your Investments in a Time of Turbulence.