The basic misunderstanding of target-date ETFs is about one-third of investors that have assets in these funds believe incorrectly that these fund promise guaranteed income at retirement. The mix of stocks and bonds does not stop changing at the target date, contrary to what some think. Depending on the fund, asset allocation simply changes but does not turn to cash. [Life-Cycle ETFs Target Retirement]
Some advisors do not believe that tighter regulation is the answer. Disclosing asset allocation at the end of the target date is not going to aid in figuring out which fund is the best to get them to retirement.
Aside from the relatively high fees that target-date funds charge “there’s only so much disclosure can do when you get at the fundamental issue of investors not being able to make the right decisions with whatever information is at their disposal,” Robert Hiltonsmith, policy analyst at the progressive think tank Demos said on US News.
As with any investment, make sure you understand what you are buying and how it fits with your portfolio and goals.
Various Target-Date ETFs:
- iShares S&P Target Date 2015 Index Fund ETF (NYSEArca: TZE)
- iShares S&P Target Date 2050 Index Fund ETF (NYSEArca: TZY)
- DBX TDX Independence 2020 ETF (NYSEArca: TDH)
- iShares S&P Target Date 2020 Index Fund ETF (NYSEArca: TZG)