Notes on risk: Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.

Investments in bond funds are subject to interest rate, credit, and inflation risk. Target-date funds are subject to the risks associated with their underlying funds. Prices of mid- and small-cap stocks often fluctuate more than those of large-company stocks. Diversification does not ensure a profit or protect against a loss in a declining market.

Differences In TDF Performance: What Really Matters?

In evaluating the performance of TDFs from different providers, it is important to consider each glide path’s underlying asset classes and the extent of exposure to each. Nontraditional and alternative asset classes, such as real estate investment trusts (REITs) and commodities, have captured much attention in recent years for the potential diversification benefit they can offer a portfolio. However, the vast majority of TDF portfolios are heavily invested in traditional stock and bond asset classes (see Figure 1). Therefore, when evaluating performance differentials for various TDF providers, understanding the composition of the portfolio’s more dominant asset classes is likely more important than isolating the potential impact of a smaller allocation to nontraditional asset classes.[5]

1 | 2 | 3 | 4 |