Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Five Reasons I’m Skeptical About Target-Date Retirement ETFs

Companies / Exchange Traded Funds Mar 11, 2010 - 12:38 PM GMT

By: Ron_Rowland


Best Financial Markets Analysis ArticleAre you planning to retire someday? Unless you are already retired the answer is almost certainly “Yes.” It’s the American Dream!

Of course, there’s nothing magical about age 65. Some people end their careers earlier and busy themselves in different ways. Others enjoy their work so much they keep on going as long as their health allows.

In either case, you probably have some idea when you’ll want to retire. And you probably consider it when planning your investment strategy — or at least you should. That’s because there’s a big difference between age 25 and age 60 when it comes to deciding what to do with your money.

ETF sponsors know this. They also know many people are looking for an “easy answer” that will let them save for retirement without having to think very much. Their solution: Target-date ETFs.

Your age governs your investment strategy.
Your age governs your investment strategy.

What’s Your Target Date?

For example, suppose you’re 40 years old. You’re in good health and live carefully. You like your work and think you can keep doing it until you are 70. That’s 30 years from now — year 2040.

With that many years to go, you can afford to be a little more aggressive now. When you get to 60+, you should probably pull back on your risk a bit.

Target-date ETFs automatically do this for you …

For instance in the above case, you might take a look at iShares S&P Target Date 2040 Index Fund (TZV). This ETF buys other iShares ETFs. The proportions are weighted to be more growth-oriented now, and will gradually change to be more conservative as the year 2040 gets closer.

Currently, TZV is allocated like this:

iShares Chart

Source: iShares

As you can see in the above chart, the portfolio is invested almost completely in stocks — roughly 90 percent. This is what most advisors would probably recommend for someone with a 30-year time horizon.

The allocation won’t stay this way. As time passes, you will see less of TZV devoted to stocks and more going into bonds …

  • In ten years, it should look much like the Target 2030 ETF (TZL) does today, with around 80 percent in stocks.
  • In twenty years, it will look like the Target 2020 ETF (TZG) now, with about two-thirds in stocks and the rest in bonds.
  • And in thirty years, it should look a lot like the 2010 fund (TZD) does now, with over half the portfolio in bonds.

iShares has a whole series of ETFs keyed to specific retirement years. Other firms offer similar products. They vary in the details of the asset allocation strategy and how it is applied, but the general idea is the same.

So What’s the Problem?

Target-date ETFs offer one-stop shopping with no need to make adjustments along the way. But I’m skeptical for five reasons …

First, their advantage is based on the assumption you will buy and hold them for many years. My experience tells me that very few people will actually do this. Investors get scared in bear markets and greedy in bull markets. They don’t just sit still like the “professionals” tell them.

Circumstances can change, too. For instance, you may decide to retire earlier than anticipated, or later. Then what? You spent decades paying for someone to implement a strategy you end up not even needing.

Second, the target-date strategy isn’t free. In fact you’re adding an extra layer of fees when you buy one of these funds. You pay once for someone to decide what ETFs to allocate your money into, and again for the ETFs they decide to buy.

Is the fee very much? In some ways, no. TZV charges 0.25 percent on top of the component ETF fees. Part of this is being waived right now, but the numbers add up over time. It could be thousands of dollars if you stick with TZV for as many years as they want you to.

Third, each fund family treats the target date differently. This means the stock and bond allocations will often be dramatically different between two funds with the same target date.

My guess is that you're the kind of investor who pays attention to what's going on in the markets.
My guess is that you’re the kind of investor who pays attention to what’s going on in the markets.

Many of these funds that were at or near their “target date” still got clobbered in the recent bear market. The reason is that many took on more risk in an attempt to look favorable when compared to funds with similar target dates.

Fourth, you probably don’t need them. The fact that you read Money and Markets tells me you want to educate yourself about investments. Chances are you can decide for yourself how to split your money between the different categories of stocks and bonds.

Fifth, investors like you are not the intended market for target-date funds. They are designed for people who don’t pay attention — folks who would otherwise keep all of their money in a low-yielding bank account.

But since you do pay attention, you can do a lot better! So it might not make sense to pay extra for something you don’t need.

Best wishes,


This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in