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One of the better investment developments to come along recently has been the target date fund. These are the funds that are managed with a specific target or maturity date in mind whether that date is retirement, sending a child to college or a major purchase. It may seem like the decision is as simple as picking a fund with your chosen target date but that would ignore several important considerations.
Many people assume that target date funds are created equal but that's actually far from the truth. The investment objective and makeup of a target fund depend entirely on the decisions made by the managers of the fund. That means a 2020 target fund managed by Company A can look very different than a 2020 target fund managed by Company B.
Before you choose a fund based on a specific date, decide what your asset allocation should be. Company A may have a 60-40 stock-bond mix for a fund whereas Company B may have a 50-50 mix for the same target date. You'll ultimately want to choose a fund that matches your desired asset allocation regardless of target date listed in the fund's name.
Another consideration should be the fund's expense ratio. Companies like Vanguard are known as low-cost leaders and will generally charge some of the lowest expenses around for managing your investment. Other fund companies can charge up to three or four times more. Expense ratios come directly out of the final return you see in your account so limiting expenses could result in thousands of dollars more in your account over the years.
Finally, you'll want to look at the composition of the fund. Some will look a lot like S&P 500 index funds where others will concentrate heavily in certain industries. Make sure you choose one that is properly diversified and carries an acceptable level of risk.
Like any other investment, target date funds require a level of research. Doing your homework can make a big difference in your bottom line.
What else can I help you with?
What is the concept of target date funds?
A target date fund is a fund that is meant to be used at some date in the future. The best example of a target date fund would be a retirement fund to be used when one retires.
What are two benefits of investing in a target date fund (TDF)?
Two benefits of investing in a target date fund (TDF) are automatic diversification of investments and a gradual shift to more conservative assets as the target date approaches.
What are the tax implications of investing in a target date fund within a taxable account?
Investing in a target date fund within a taxable account can lead to tax implications such as capital gains taxes on any profits when you sell the fund, as well as potential taxes on dividends and interest earned within the fund. It's important to consider these tax implications when investing in a target date fund in a taxable account.
Target Date Funds?
Today pensions and other defined benefit plans are all but extinct, leaving most of us in the working world to bear our own investment risk for our retirement nest eggs. The most popular type of plan used today is the 401(k) plan and it’s a good type of investment account for the retirement accumulator. The problem with such accounts is that the investment decision making is necessarily borne by the individual worker, who may not be an investment whiz. After all, you specialize in your individual trade, not investing. One option that has sprung up in recent years in many 401(k) plans is the target date fund. These funds may make investors more comfortable because they allow you to simply select the year or date range in which you plan to retire and a team of investment experts will control the asset allocation to adjust for a tightening risk tolerance over time. As your retirement date approaches these funds tend to become less aggressive and more focused on capital preservation as opposed to capital appreciation. So with a target date fund you get the benefit of regular monitoring and reallocation by a team of professionals.K One potential drawback is the structure of these funds. Usually they are created by a fund family that already is part of your 401(k) network as a fund-of-funds. What that means is that if you have Smith Funds as your main investment options that there might be a Smith Fund 2040 Target Date Fund. This fund is designed to work best for folks planning to retire in or around 2040. However, if it is constructed as a fund-of-funds of Smith family funds then it will be divided up between Smith Large Cap Fund, Smith Long-Term Fixed-Income Fund, Smith Small Cap Fund, Smith Global Fund…etc. You’re already paying a management fee to invest in all the underlying funds. With a target date fund-of-funds you add the fees for the target date fund to the management fees for each underlying fund. These fees can be considerably higher than if you simply controlled the allocation yourself using the same underlying fees that the target date fund uses. So read the fine print and decide if it is worth it to use the target date fund.
What is a source of funds?
Funds of FundsA fund of funds represents a mutual fund that invests in other mutual funds. One of the best examples of this type of investment style is the target date fund.These types of funds are designed to provide a broad based diversification. In target date funds, the portfolio of underlying funds allows the fund manager to shift investments as the fund nears its target date. In a target date fund, a date in the future is selected by the investor that often relates to the year in which they would like to retire. The fund manager shifts the portfolio from aggressive investments to more conservative ones over time.There are certain things an investor should consider before investing in this type of fund. One, the cost of owning these funds may be higher. These additional fees can be found in the prospectus under "Acquired fund fees and expenses" and should be added into the other fees the fund charges. Two, you must rely on the fund manager to achieve the diversity you want and allocate the assets accordingly. Three, these types of investments may be focused on matching the comparable benchmark rather than beating it.Carefully read the prospectus before investing, understand your risk tolerance and consider other opportunities such as index funds to meet your goals.
Which mutual fund should I pick?
You need to do your research before choose a mutual fund. Find a fund that offers dividend distributions. A fund that invests heavily in stocks is good for capital growth.
What is discretionary funding?
"Discretion" in this usage is a synonym for 'choice.' It means that whatever it that needs the loney, 'they' can choose to fund it, and if so, how much they will spend on it. OR - they may choose NOT to fund it. It is totally at "their" discretion (i.e.: choice).
What is a target retirement fund?
A target retirement fund would be good for someone based on their own personal situation and what they hope to gain along with more issues to take in consideration. Target Retirement fund is risky and should be researched carefully. Depending on how much you are looking to invest and what type of funds available to invest, when you are looking for the return are some questions that need to be considered before making this choice.
What are fund?
Fund resources are types of investments that people can choose to put their money towards. The goal of this is to generate a larger sum of money.
When is it appropriate to account for special assessment activities in an agency fund?
Special assessment activities should be accounted for in an agency fund when a government entity collects resources from property owners to fund specific projects that benefit those properties, such as street improvements or sewer installations. These funds are typically held temporarily until they are distributed to the appropriate entities or used for the designated purpose. The agency fund is appropriate because it reflects the government's role as an intermediary, managing resources without having ownership of them. This ensures transparency in how these funds are handled and reported.
What is fund requirement?
A fund requirement pertains to all funds required to commence a project. There are however appropriate funding and inappropriate funding the list of fun requirements remind all investors of what is acceptable.
Best available target retirement funds, worthwhile.?
The best available target retirement fund is different for everyone depending on needs and time-frame available. It is worthwhile because it will save you a lot of money.
