Target Date funds have been growing in popularity for the last decade. Their rise in popularity can be attributed to a number of factors, however their “auto-pilot” or “hands-off” approach is what has led many investors to choose these funds for their retirement portfolios. Target date funds have made investing much easier than in the past, especially with inexperienced investors. These funds have a “set it and forget it” approach, which allows an investor to choose a fund that has an underlying mix of stocks and bonds that are in-line with their risk tolerance and long-term goals; additionally, these funds automatically become more conservative as an investor approaches retirement.
The Investment Planning Committee at DirectAdvisors has added the Vanguard Target Retirement lineup of funds across our 401(k) and 403(b) plans, due to their above average performance and below average cost. In the coming months, we will be migrating the default investment options in our plans (or QDIA’s) to the Vanguard lineup as well. This will ensure that investors who do not select an investment choice will automatically have their account balance invested in a fund most closely aligned with their projected retirement date.
Click here to read an article by Nathan Hurst discussing the advantages of auto-pilot (or target date) funds, especially for inexperienced investors.