Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
FYI: ALBERT EINSTEIN reportedly once said, “Everything should be made as simple as possible, but not simpler,” or words to that effect. Regards, Ted https://humbledollar.com/2018/09/off-target/
I am no lover of target date funds for attentive investors, but I think they can serve some investors well. I posted an extended comment to this effect on the page. (There's a second comment there as well making a similar point.)
Herein is my comment:
While there's merit in some of the issues raised, methinks thou doth protest too much.
Target date funds are designed for those who don't want to think about their investments, who don't want to monitor them. (And if they do, all they have to do is check the glide path in the prospectus.)
They are best used as "all in" investments. If one mixes and matches target date funds with other investments, the point of using them is lost. Admittedly there are some assets that can't be rolled in, like SS and other lifetime income streams (annuities, pensions). So when one initially selects a glide path, one takes these into consideration. A one-time-only task, as opposed to continual monitoring. Again, for those disinclined to manage their investments.
There is something to be said for separating stocks and bonds for tax purposes. Though the same argument can be made for all allocation funds, including traditional, statically allocated balanced funds, such as Vanguard Wellington.
Arguing that because there are a few bad apples (that add a second layer of fees) one should avoid the category altogether is specious. It is like saying that because some index funds carry loads or come with high fees, one should avoid index funds entirely.
Finally, nearly half of households with investment accounts own only retirement accounts (33% hold taxable accounts, 29% retirement only, the remainder no investments). For them, tax issues are moot. They are also less likely to be financially literate and thus more likely to benefit from a target date fund. For them, target date funds are not too simple.
Comments
Herein is my comment:
While there's merit in some of the issues raised, methinks thou doth protest too much.
Target date funds are designed for those who don't want to think about their investments, who don't want to monitor them. (And if they do, all they have to do is check the glide path in the prospectus.)
They are best used as "all in" investments. If one mixes and matches target date funds with other investments, the point of using them is lost. Admittedly there are some assets that can't be rolled in, like SS and other lifetime income streams (annuities, pensions). So when one initially selects a glide path, one takes these into consideration. A one-time-only task, as opposed to continual monitoring. Again, for those disinclined to manage their investments.
There is something to be said for separating stocks and bonds for tax purposes. Though the same argument can be made for all allocation funds, including traditional, statically allocated balanced funds, such as Vanguard Wellington.
Arguing that because there are a few bad apples (that add a second layer of fees) one should avoid the category altogether is specious. It is like saying that because some index funds carry loads or come with high fees, one should avoid index funds entirely.
Finally, nearly half of households with investment accounts own only retirement accounts (33% hold taxable accounts, 29% retirement only, the remainder no investments). For them, tax issues are moot. They are also less likely to be financially literate and thus more likely to benefit from a target date fund. For them, target date funds are not too simple.
Data in the preceding paragraph comes from FINRA (2015):
https://www.finrafoundation.org/files/snapshot-investor-households-america