| For retirement asset management, there are so | | | | Another advantage with target retirement funds |
| many investment options for the average | | | | is the consistency. In instances of market |
| shareholder. From small capitalization stock funds | | | | downturns, you know that your portfolio will be |
| to money markets, new people investing in the | | | | like a rock. There's a portion of the fund that is |
| market will find themselves buried in the details. | | | | invested in debt instruments and it will not change. |
| How does one pick the right funds to save for his | | | | Knowing that the fund will maintain its asset |
| or her retirement? | | | | allocation has its advantages since you won't need |
| Today, mutual fund companies are providing | | | | to worry about devoting part of your assets for |
| retirement specific investment options. Instead of | | | | market corrects and downturns. |
| hiring a personal asset management consultant or | | | | But do target retirement funds really benefit the |
| relying on books and literature, investors can now | | | | consumer for the long run in asset management? |
| turn to funds that will do it all. These funds are | | | | A number of analysts have been arguing that |
| often coined as "targeted retirement funds". | | | | target retirement funds may not be |
| Under one mutual fund, you'll find a collection of | | | | advantageous. |
| varying investments that are intended for | | | | One of the biggest concerns is that the funds are |
| retirement. Large mutual fund companies such as | | | | allocated too conservatively. For the young |
| the Vanguard group and Fidelity are vying to save | | | | investor that we mentioned, there's still a |
| you time and money by offering a one-fund | | | | significant portion of the fund's allocation in bonds. |
| option to address all of one's retirement needs. | | | | This may be great to weather the downturns of |
| Do these "target retirement" funds actually help | | | | the market. However, how often do we have |
| people in their retirement planning? Some financial | | | | long downturns? Even for stock investors, |
| analysts argue that there are tremendous | | | | downturns are temporary and there's no reason |
| advantages to these one-stop shop funds. Others, | | | | why an investor will lose out in these conditions |
| however, do not feel the same way. | | | | for the long run. |
| Let's begin with the advantages. Target | | | | Moreover, individuals are living longer. With |
| retirement funds provide investors ease of use | | | | conservative allocation mixes, less money will be |
| and simple asset allocation based on age and risk | | | | available during retirement. Since bonds and cash |
| tolerance. The mutual fund companies provide | | | | reserves (conservative investments) provide |
| pre-selected retirement funds so that the | | | | lower returns, retirement dollars may not be able |
| investor does not have to choose. A fund for | | | | to stretch over the long run. |
| younger retirement investors could have an asset | | | | Target retirement funds could be not as helpful |
| allocation mix of 60% in stock funds and 40% in | | | | since they don't account for your total financial |
| bond funds. The stock allocation could be broken | | | | situation. It's possible that a shareholder might |
| down to varying index portfolios, large | | | | have a large nest egg. If so, then it would not |
| capitalization stock funds and more. As one can | | | | take account of these assets and may |
| see, the mutual fund company will choose which | | | | overestimate risk for the shareholder. |
| type of investment that a person will own, not | | | | Target retirement funds for asset management |
| the investor. | | | | may offer convenience and simplicity for |
| Thus, a retirement investor does not have to | | | | retirement. However, there are some drawbacks |
| think about their portfolio with a target retirement | | | | that one needs to understand so that he or she |
| portfolio. The shareholder would merely need to | | | | can make the right decision. |
| purchase the fund for an IRA or 401(k). | | | | |