Charles Schwab is the latest firm to offer target date retirement funds. A lot of firms have this type of product. They allow investors to "set it and forget it." These funds will reduce equity exposure and increase bond exposure as time goes on toward the target date.
I hate this type of product. How would any investor feel if at the end of one year the allocation to equities drops from 60% to 40%, the next year the market embarks on a 30% rally and money flows out of bonds to facilitate that rally? Devastated.
The other thing I read in this article is that Schwab's offering will be funds of funds. I have to confess I did not know that any company uses the fund of funds approach with these target products. This makes them even less appealing than I thought.
This ties in with the last post I put on the blog. Sometimes the direction of the markets are clearer than other times. Do you think that some one in their 70's needs to capture a good chunk of a huge up year for stocks? I do.
While there are never any guarantees there are times where a do it yourselfer can survey the landscape and put the odds in their favor without using an ill-conceived, statically allocated product.
Wikinvest Wire
1 comments:
Amen!
Most of these type accounts start out too heavy on bonds anyway. A fifty year old couple is odds on that at least one will live to be 90. Anyone who plans to invest for 40 years needs equity exposure.
Post a Comment