How to Choose a Target-Date Fund
Expenses and glide path are just two factors that investors should consider.
Jeff Holt: An investor looking to put their retirement savings in a target-date fund simply selects a fund with a target date in its name that most closely corresponds to the year they plan to retire. For example, if a 43-year-old investor plans to retire at age 65 in the year 2041, they would select a target-date fund with 2040 in its name. Target-date funds have diversified portfolios and are designed to be the single holding for retirement savings, so investors generally do not need to invest in multiple target-date funds.
Investors should note that the investment approach varies by target-date provider. And while target-date funds are meant for investors who want to hand over the asset-allocation decisions to professionals, there’s a few things that investors can peek at to build their confidence in their choice.