Target date funds hold a lot of stock, which can be risky. Aren’t employees being forced to take more risk than they want, particularly in volatile markets?
An investor is not required to stay in a particular QDIA or target date fund. Each investor can and should decide whether he or she is comfortable with the fund’s investment approach. Regardless of whether the investor selected the target date fund or was invested in it by default, the investor can always make an affirmative election to invest in other investment options offered by his or her plan, including a target date fund with a different target date holding a larger or smaller percentage of equities. Target date funds pursue a long-term investment strategy that should not be judged by short-term market fluctuations. Research shows that holding a mix of asset classes in a portfolio is one of the most important factors in long-term portfolio performance. Portfolios that do not hold any equity are likely to underperform in the long term. Fund managers design their target date funds with the long term in mind, based on many factors, including various investment-related risks and assu
