As billions flow into target date exchange traded funds (ETFs), do investors have the staying power? These types of investments are meant to be purchased and forgotten about until the desired date. How do you track and compare performance on target date funds? These retirement funds come in a wide array of styles, shapes and sizes, so how can you compare? Lipper offers a rating based on past performance and are weeding out the ones with no proven track record. Kevin Burke for Ignites reports that the type of ranking system pits the performance of all 2030 funds against each other on a quarter-by-quarter basis, for the 12 quarters ending September 2007.
These are more conservative options, and the main problem is that investors feel they are underperforming when these kinds of funds lose money during a bear market. During a bull market, does greed take over? These target date funds may actually underperform because of the lack of diversification.
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.