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July 9, 2012

Due Diligence is required in selecting target-date funds.

The Wall Street Journal July 8, 2012 published another article discussing target-date funds,  “One Target, but Many Ways to Hit It”.  The sub-title of Michael A. Pollock’s article is “Target-date retirement funds sound simple.  But competing strategies make it tough to choose one.”  The article starts with: “With target-date funds, the targets themselves never change.  But the strategies for hitting those targets are all over the place.” 
“But even as dollars pour into such funds, the asset-management industry continues to debate how best to design the funds for their central mission. 
This article provides a discussion of the factors that differ among the various investment firms.  Understanding these issues may help you select the target date funds that fits your personal profile.  It will help if you know what your financial goals are, when the goals occur, your current investment assets, your health, whether you can tolerate the fluctuation in the values,  your tolerance for losses, and many other factors.
You should understand the mix of assets (stock, bonds, alternatives) and how they change to the target date.  As important is how they change after the target date.  How does the fund inform the investors when they change these factors and the timeliness of the disclosures should be considered.  Naturally, the expenses of the fund should be a factor.
With these factors you can pick the fund that comes closest to your situation.
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