Comments on: Why I Hate Target Date Mutual Funds and You Should, Too

By: Peter

Peter — Mon, 25 Feb 2019 23:53:51 +0000

A financial planner telling everyone that a new development that makes it easier to manage a 401k without a financial planner actually sucks and that you really do need to pay a financial planner? Imagine my shock. TDF’s are great, if you put even a modicum of research into it and check in once or twice a year.

By: Jeff Rose

Jeff Rose — Thu, 27 Sep 2018 20:37:10 +0000

In reply to Yana Felix. Thanks Yana!

By: Yana Felix

Yana Felix — Wed, 19 Sep 2018 18:49:34 +0000

This is good info. Thanks for posting it. I have been trying to make sense of all the retirement saving/ investment options available out there. It is overwhelming.

By: Nichole

Nichole — Tue, 13 May 2014 14:47:10 +0000

Interesting Blog. Thank you for sharing.

Target Date Funds are pretty controversial, but I think they are actually helpful for people who do not have a large sum to invest and want broad exposure to the market. If you have a 30+ year investing horizon and LOW FEES you cannot go wrong with a target fund in my unprofessional opinion.

I guess I should also add my view is that investing is not conventional anymore. You can’t simply “set it and forget it” like in decades past. Investing has to be much more diverse.

My strategy is to minimize taxes and preserve my capital by using the Target Fund as a (grows tax free) foundation and then supplementing, ETFs for a trend play, physical real estate (depreciation), currencies, and Precious Metals (untaxed appreciation). This way I have more diversity in my portfolio and can liquidate more easily if I need to.

I pay close attention to taxes and fees because at the end of the day the money you get out of these investments is AFTER paying the fees and taxes! Keep it Simple.

By: Logan

Logan — Fri, 21 Mar 2014 21:00:51 +0000

I am a portfolio manager for private clients and give investment advice, much like yourself. I have quickly read through your analysis as I came across it and have many issues with it. Target date funds have not been around for ten years, have they? Where are you pulling this performance info if it doesn’t exist? Regarding the individual funds available, 401(k) trustees are prone to the same behavioral biases as individual investors, they select funds based on past performance. So the funds available in 401(k)s tend to be the one’s that have performed the best in the past 3, 5, or 10 years. How many times do you get notices from clients that there are investment changes in their plan, I get them every week! The funds change. Also, how often are you rebalancing your individual funds’ portfolios? If you are not rebalancing and they become equity heavy, of course they will outperform a target date fund which becomes increasingly more conservative as time passes! A fairer comparison would be a rebalanced portfolio vs. strategic asset allocation funds that keep asset allocation more consistent across time. These are just a few… I am sure there are other issues. Although they are not the most ideal investments in the world, I don’t think it is fair to write off target date funds as poor investment choices. Each circumstance is different…

By: Jeff Rose

Jeff Rose — Wed, 22 Jan 2014 21:20:08 +0000

In reply to Lynne. Thanks Lynne!

By: Lynne

Lynne — Sat, 12 May 2012 20:15:49 +0000

Precisely why i got OUT of these target date funds in my 401K, I was losing big time. To quote Mr. T.. ” I pity the fools” that stay in them.
They have no idea how much money they are losing.. Keep discussing this and help people understand.

By: Jay

Jay — Fri, 27 Apr 2012 18:07:47 +0000

great post. I am also an investment advisor and I totally agree with Jeff.

target date funds BLOW!

By: Jeff Rose

Jeff Rose — Mon, 27 Feb 2012 18:03:00 +0000

In reply to MarkE. Mark, thanks for stopping by the site. When I was deployed to Iraq, I never participated in the TSP. I, instead, elected to focus both on my and my wife's Roth IRA and paying down some pre-deployment debt. Personally, I'm not a big fan of the TSP as I feel the investment options are very generic "C Fund, G fund, I fund, etc". The target date funds are just an extension of those. I like the ability to having control in what I invest into; hence the Roth. That being said, if I were a career officer and still had more money to invest on top of maxing out the Roth's, I would probably still use the TSP. There's no other tool that gives you the ability to sock away big chunks of money unless you are also self-employed. Once you officially retire, I would look to roll your TSP into an IRA so you now have control. Btw, thank your for your continued service!

By: MarkE

MarkE — Mon, 27 Feb 2012 17:56:27 +0000

Hi Jeff, I’m a career Military Officer, and I was wondering what you thought about the government’s Thrift Savings Plan (TSP) and their target date funds. Thanks in advance.

Mark