Christine Benz, Director of Personal Finance for Morningstar and a Director of the John C. Bogle Center for Financial Literacy, has written an insightful article about Target-Date Funds. These are excerpts:
Bogleheads can read the full article here."People love to hate target-date funds."
"Oftentimes, target-date critics are selling some type of investment advice themselves; they may not admit it, but they view target-date funds as competition."
"Target-date funds have been nothing short of the biggest positive development for investors since the index fund."
"They provide an element of inexpensive, quite reasonable investment advice for people who might not otherwise be able to afford it and might otherwise be making kooky choices."
"They provide their investors with an element of advice, and they do so at a very low cost."
"Prior to the advent of target-date funds, it wasn't unusual for investors to select investments in their 401(k) lineups based on which ones had the highest returns or star ratings, or to put 10% weightings into each of the 10 holdings in the lineup. By embedding some basic asset-allocation advice and ongoing oversight, target-date funds serve people who don't have investment backgrounds incredibly well."
"Thanks to positive timing decisions (they didn't buy high and sell low), the owners of allocation funds actually enjoyed slightly better returns than the funds' total returns."
"Target-date fund investors stay put."
Jack Bogle's Words of Wisdom: "It is no exaggeration to say that the superb Morningstar service provides all the information an investor could possibly need to evaluate a fund's characteristics, to understand a fund's persona, and to make informed decisions."