Some investors also perceive target-date funds as inherently safe investments, or worse, as guarantees of having enough for retirement. In reality, different funds offer very different levels of risk. Further, many target-date funds take as a given that bonds are safer than equities, and so will weight bonds more heavily as the investor approaches the fund's target date. dating.com scam Given the current low interest rate environment, the margin of safety offered by bonds over equities is not so clear-cut. Future rises in interest rates will mean lower bond prices. The impact of the changing rates will depend on the duration of the bonds in the fund. In general, bonds with a longer time to maturity will see greater price declines as rates rise.

How much damage investors will suffer as a result of rising rates will depend on how quickly and how high rates rise, as well as the composition of the particular fund's bond investments. Funds with higher allocations to long-term bonds will see larger losses than dating.com review  funds that have shorter-term bond holdings. Those who happened to retire during 2008 or 2009 faced a stock portfolio battered by the recession; retirees who invest in target-date funds that take the safety of bonds as a given may soon find themselves in a similar situation.

Besides understanding the general risks of target-date funds, investors should be aware that not all such funds are the same, even if they have the same target year. Each fund family has its own philosophy regarding which asset classes (for example, commodities or real estate) should dating.com scam be included in its target-date fund lineup, how frequently the fund will rebalance, and when and how quickly the fund will shift to investments that are more conservative. If investors do not understand their fund family's strategy, they could easily find themselves invested in a fund that is not appropriate for their situation.

Investors should also understand that the proper fund for them might not be the one targeted for the year they expect to retire. For example, individuals with a higher risk tolerance might prefer to maintain a higher weighting to stocks through retirement. They should consider investing in target-date funds with a date later than their expected retirement year (such as 2030 instead of 2020).

Target-date funds typically have higher exposure to stocks the further they are from their target year, so choosing a date farther in the future tends to preserve a higher level of stocks and potentially higher returns. dating.com review It is also important to realize that some funds aim to reach their most conservative level at their target dates, while other funds may not shift to their most conservative allocation until years later. This all depends on the philosophy of the fund operator. It is essential to ensure the selected fund matches the investor's goals.

Selecting a target-date fund should involve the same sort of due diligence involved in selecting any other investment. It may be helpful to examine a company's fund for current retirees to obtain some idea of what a portfolio close to retirement might look like. This exercise is most useful for someone looking to invest in a fund with a date closer to the present. The further away the target date is, the more likely it is that the fund operator could change the fund's strategy before the date is reached.

Beyond the questions discussed above, investors should also consider:

How the allocation of the fund fits with the other investments in their portfolio

Their risk tolerance, both in the present and in the future

Whether the fund uses actively managed investments or index funds

How much tactical freedom the fund manager has to depart from the glide path if market conditions change

How often the fund rebalances

All of this is not to say target-date funds are never useful. There are many logical reasons for this. Gone are the days of defined benefit plans, and investors must now save for their own retirement. Investors often have little else in their portfolio outside their retirement account(s), many of which are likely to contain target-date funds by default. dating.com scam Also, many investors do not feel comfortable managing their own portfolios. These funds guarantee a certain default level of professional expertise, which some investors find comforting.

However, investors in target-date funds shouldn't think they can simply "set it and forget it." Few investors would give money to an investment adviser and then neglect to check in for 10, 20 or 30 years. Why do the same with a target-date fund? Investors should review their fund's asset allocation and expenses regularly. In addition, while an investor may have selected a fund that was right for his or her needs at the time, those needs can subsequently change. Inflation, rising interest rates, a new job, a changed family situation or new plans for retirement can all factor into making a formerly good fit an uncomfortable one. Even if the investor's personal situation has not changed, the fund family's philosophy may have.

When deciding to invest in a target-date fund, investors need to know more than just the year that they plan to retire. And, as with any other investment, investors should monitor their fund's objectives and investment strategy over time, to let them make adjustments when necessary. Those who don't may find that their target-date fund ultimately missed its mark.