More Firms Offer Lifecycle Funds

In spite of the recent, strong upturn in the market, investors are still gun-shy and looking for guidance, The Wall Street Journal reports. Lifecycle funds that automatically shift the balance between equity, fixed income and money market holdings as people age have recently gained popularity, and, as a result, more fund companies are offering them. Fidelity, Vanguard, Charles Schwab, T. Rowe Price and Wells Fargo are among the firms offering them.

And with only one in six 401(k) investors making a change to their investments last year, according to Hewitt Associates, funds on "autopilot" serve a need. However, detractors say that because these funds shift their holdings over time, they are more difficult than straightforward mutual funds to judge by their past performance. Also, not all investors are created alike; risk profiles and investment needs may vary widely, critics say.

Nonetheless, assets in lifecycle funds – also called target maturity, target date or morphing funds – have increased 80% since 1999, from $21.63 billion to $39.13 billion today, according to Financial Research Corp.

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Money Management Executive
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