Skip to content

August 13, 2011

Target-date fund do not eliminate the need for planning.

One of the topics discussed in Morningstar’s 2011 research paper on target date funds relate to the period used in determining the asset allocation.  Some use the period “to” the retirement date and others are designed to take the investor “through” retirement.  The paper did not reach a conclusion as to which “glide path” was better.  Rather it highlighted the need for investors to know which “glide path” was being used.
Knowing what the investment categories used and when the categories change is also important for the investor to know.  Of equal importance is portion of the investments allocated to each category and when they change. 
Each investor needs to evaluate if the target-date fund they are using fits their individual needs.  All investors have different financial goals and different time horizons to achieve those goals.  The priority of the goals also varies.  As each persons’ situation is unique, including the need for income or capital preservation, the investment mix will not be the same for everyone. 
If the mix of investments is not completely appropriate for you, you need to determine the steps to take to improve the likelihood that your goals will be met.  Among the information you will need to determine what actions to take are: your financial goals, the relative importance of each goal (priority), when you want to meet the goal.  That is, you cannot avoid planning by the use of target-date funds. 

Back to Top

Share your thoughts, post a comment.

You must be logged in to post a comment.