Exchange traded funds (ETFs) have enjoyed success with more than $500 billion in assets, so will lifecycle ETFs be their best ticket into the retirement market dominated by mutual funds?
At the end of 2006, 401(k) plan assets grew to about $2.7 trillion, according to Investment Company Institute, and about 50 million American workers participated in 401(k) plans at year-end. Mutual funds have enjoyed a boost from the rise of the 401(k) plan because they account for most retirement investment options, reports John Spence for MarketWatch.
Meanwhile, ETFs have had a difficult time entering the popular retirement market. However, the recent partnership between TD Ameritrade and XShares Advisors to launch the first family of lifecycle ETFs could change that. The new ETFs are classified by the year in which the worker aims to retire, so the fund lessens risk as it matures. Also known as target-date funds, lifecycle funds are becoming popular with the younger generation of workers their 401(k) plans.
Aside from the target-date funds, the ETF industry has tried other methods to break into the retirement industry. BenefitStreet and Barclays struck a deal to distribute ETFs to corporate sponsors. WisdomTree also recently jumped into the retirement market.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.