Top performers: Target-date funds 2040 - 2045
Target-date funds aimed at investors at the start of their working careers – with much as 89% of their assets allocated in stocks – generally topped their 2040 and 2045 category peers over the last five years.
"That exposure lifted their five-year returns higher than target-date funds aimed at investors nearing retirement in a period when stocks easily beat bonds," notes Jeff Holt, Morningstar’s associate director for multiasset strategies.
By being more aggressive, the leading funds in these categories outperformed the average 2015 target-date fund by more than 150 basis points. “Investors early in their careers can weather the market turbulence," Holt says.
The Schwab Target 2040 fund, at the top of its 2040 peers over the last five years, for instance, holds more than 84% of its assets in U.S. and non-U.S. stocks, according to Morningstar. The same is true for the American Funds 2045 Target Date Retire A and the T. Rowe Price Retirement 2045, which have 83.3% and 85.9%, respectively, in stocks.
Much like the average top-performing 2015 target-date funds, those with 2040 and 2045 target years that "held more U.S. large-cap stocks than their average peers" saw better returns than those in small-cap and emerging markets, Holt says.
All this week, look for data on top performers among target-date funds for 2000 through 2055.