A Much-Maligned Fund Group Bounces Back
After suffering in the bear market, 2010 funds regain some respect.
As the calendar turns over to 2010, the group of mutual funds built for investors intending to retire in or around that year has taken important steps toward restoring its tarnished reputation.
Target-date funds were subject to a maelstrom of investor ire and governmental scrutiny over the past year, and none more so than 2010 funds. In calendar-year 2008, that group of funds lost an ungainly 23% on average.
That was a tough pill to swallow for investors preparing to dip into their nest eggs or who mistakenly thought their investments were conservatively positioned so as to avoid most of the perils of a bear market. In fact, all of the target-date 2010 offerings provide some exposure to the equity markets, and those that are most concerned by longevity risk--the risk that investors will outlive their savings--tend to invest upward of 50% of assets in stocks. So, losses among these funds should not have been a big surprise. But the magnitude of some losses (with the hardest-hit fund cratering with a 41% loss) was certainly alarming.
Josh Charlson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.