Top performers: Target-date funds 2020-2025
Target-date funds aimed at investors who plan to retire in 2020 or 2025 offer the final opportunities for advisers to make needed adjustments before clients enter the long-awaited decumulation phase.
"This is a period where it could be expected that allocations are at, or near, their peak levels," says Jeff Holt, Morningstar’s associate director of multi-asset strategies research. "They still have a lot of earning potential for growth, but also it's a tradeoff, so [clients] are going to be exposed to some market risk."
In the second part of our series on top-performing target-date funds, the American Funds Target Date Retirement funds "proved advantageous over the past five years," says Holt, noting that the fund family topped both the 2020 and 2025 categories.
Holt added that while large-cap stocks did exceptionally well over the last five years, many of the funds in the top five saw positive performance numbers due to their exposure to the asset class. "Target-date series that invest in index funds, such as Vanguard Target Retirement and TIAA-CREF Lifecycle Index, frequently skew to large-cap stocks over small-cap stocks," he says.
All this week, look for data on target-date fund performance for 2000 through 2055.