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Not All Target-Date Funds Have the Same Pattern

Stock and bond movements in 2014 have created a wide range of outcomes among target-date series from different providers.

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Janet Yang: So far in 2014, we've seen some pretty interesting performance patterns coming from target-date funds. Basically you have your shorter-dated 2015, 2020 funds actually outperforming your longer-dated funds such as the 2045, 2050 funds.

And to see why that happened, just look at what happened in the markets. And basically you'll see that fixed-income funds, fixed income in general, outperformed equity markets. And so target-date series with fewer equities generally tended to do better. 

Basically your Wells Fargo funds and the PIMCO target-date series, for example, did pretty well in the first four months of 2014. On the other hand, series with more equities, such as the T. Rowe Price series or the AllianceBernstein series, tended to lag their peers.

There is a pretty wide range of outcomes. I think that just serves as a reminder to investors that it's not just as simple as picking a target-date fund, and it really helps to look underneath the hood to see what you're getting. 

Janet Yang Rohr, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.