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Is Your Target-Date Fund's Glide Path Unstable?

Morningstar Ibbotson research identifies which target-date series have the most- and least-stable glide paths.

The SEC's recent investor survey reaffirmed that investors misunderstand target-date funds in many ways: They tend to think they are safer than they really are, for instance, and they imagine there are few differences in the design or risk profile among target-date series, when in fact those differences can be dramatic.

Another little-recognized aspect of target-date funds is their glide paths--the way an investor's asset allocation changes over time--may change. This is not the expected change in allocations from year to year as stocks decline and bonds increase; rather it's when the entire glide path itself shifts up or down, so an investor who is 25 years old today does not have the same stock allocation as a 25 year old did five years ago.