Accentuating Portfolios Beyond Target Date Funds

For younger, less experienced investors, a Target Date Fund can be an easy way to get started in investing.

For more accomplished investors, we generally don’t recommend Target Date funds for the following three main reasons.

1. Target Date Funds do not consider your other investment assets or income sources, potentially taking on significantly more or less risk than intended.

2. No two Target Date Funds are alike, even if they have the same name. Vanguards Target Retirement 2040 Fund (VFORX) is 51.13% US stocks as of January 31, 2013 (morningstar.com), while Schwab’s Target 2040 Index Fund (SWEGX) has a 71.79% US stock allocation as of December 31, 2017 (schwab.com).

3. Target date funds automatically change allocation over time, which might not match your desired allocation and risk tolerance.