NC State Ag Economist Dr. Mike Walden – “What are Target-Date Funds?”


Mary:  This is Mary Walden with economist MW, welcoming you to the economic perspective.  Today’s program asks, what are target-date funds?  Mike, for many, the investment world is confusing.  It’s often hard for investors to know when to make decisions and what decisions to make.  I understand one kind of investment tries to eliminate these issues.  What is the investment, and what are its pros and cons?

 Mike:  Summary Answer

  1. Investment advisors agree on two principles: should diversify your investments, and should change the mix at key points in life
  2. Target-date funds aim to do both
  3. First, will put your money in several categories of investments – stocks, bonds, money market funds, etc.
  4. Second, will change the mix at keys ages of the investor
  5. Example – move away from riskier – yet higher return – investments to safer, but lower return investments as move closer to retirement
  6. Supporters say many investors don’t do this, so target-date funds do it automatically
  7. Detractors say too rigid – changes should take account of market conditions
  8. But, an option to study
  9. I’m MW

Mary:  And I’m Mary Walden for the North Carolina Cooperative Extension Service