Are target date funds dinosaurs? Failure to adapt can lead to extinction
Portfolio Management
2017-05-02 v1
Abstract
Investors in Target Date Funds are automatically switched from high risk to low risk assets as their retirements approach. Such funds have become very popular, but our analysis brings into question the rationale for them. Based on both a model with parameters fitted to historical returns and on bootstrap resampling, we find that adaptive investment strategies significantly outperform typical Target Date Fund strategies. This suggests that the vast majority of Target Date Funds are serving investors poorly.
Keywords
Cite
@article{arxiv.1705.00543,
title = {Are target date funds dinosaurs? Failure to adapt can lead to extinction},
author = {Peter A. Forsyth and Yuying Li and Kenneth R. Vetzal},
journal= {arXiv preprint arXiv:1705.00543},
year = {2017}
}