Taking Aim at Target Date Funds, Part 2

In part one of our series, we explored the world of target date mutual funds. These funds are incredibly common options within qualified retirement plans and are also quite popular. What else do you need to know about target-date funds? Let’s take a closer look.

Target date funds use a traditional portfolio management methodology to target asset allocation over the term of the fund to meet the investment return objective. Named by the year in which the investor plans to begin utilizing the assets, usually at retirement, target date funds are considered to be extremely long-term investments.

Following the initial launch, a target-date fund has a high tolerance for risk and therefore is more heavily weighted toward high-performing but speculative assets. A target-date fund’s portfolio mix of assets and degree of risk becomes more conservative as it approaches its objective target date. This means that a 2060 target date fund is invested in riskier assets, while a 2025 target date fund has a more conservative asset allocation.

The three main advantages of investing in a target-date fund are:

  • The ultimate autopilot way to invest
  • All-in-one vehicle—no need for other assets
  • A diversified portfolio

Target date funds aren’t perfect investments; no investments are perfect. But they are generally suitable for long-term goals, such as retirement savings. Take look at your options, and we can help you decide if a target-date fund works for you.

Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice.

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