While target-date funds adjust a portfolio’s level of risk as an investor gets closer to their target retirement date, they fail to address the various risk tolerances of different investors. Thus, fund companies have begun working on offering tailored target-date funds to 401(k) plan sponsors, The Wall Street Journal reports.
For instance, a 2020 target-date fund may come in three versions: conservative, moderate and aggressive.
But some aren’t so sure that investors will understand or cotton to these offerings. “All this terminology—conservative, moderate, aggressive—none of this means anything to people who are not familiar with investing,” said Zvi Bodie, a professor at Boston University School of Management.
Through September, assets in target date funds have risen 46% to $169 billion.