Will Target-Date Funds Meet Your Retirement Goals?

Lately, I have seen a variety of articles touting the benefits of using target-date funds (also known as Lifestyle or Life-Cycle funds) to reach your retirement goals.

One write-up in particular started out by intelligently stating that “low contribution rates could leave investors with a retirement shortfall.”


If I don’t contribute to anything, I’ll be facing some kind of shortage in the future. It doesn’t take a mathematician to arrive at that conclusion. That would apply to any type of investment account, wouldn’t it?

The problem I have with Lifestyle funds is that the investing public is lulled into a false sense of security by believing that this type of fund, if regularly contributed to, will be a “safer” investment than a “regular” mutual fund.

This is absolutely not true. Lifestyle funds go down in value during bear markets just as much as other funds. I wrote the article “Do Lifestyle Funds Provide Greater Security” some 4 years ago, just before the U.S. bear market was running out of steam.

You can read it at: http://www.successful-investment.com/articles11.htm

Whether you decide to use Lifestyle Funds, or any other vehicle for that matter, using a prudent approach by staying out of the bear trap (via a sell stop discipline) will do more for your financial health and your future retirement than the investment itself.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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