Exploring the pros and cons of target date funds
DOI:
https://doi.org/10.61190/fsr.v20i2.4695Keywords:
Mutual funds, Lifecycle funds, Target-date funds, Bootstrap, Asset allocation, RetirementAbstract
Herein, we explore the potential performance of both fixed allocation and target date strategies using one, five, IO, 20, and 40 year bootstrapping windows. We find not only that the mean accumulations and annuity values rise with the stock allocation percentage but also that both the Sharpe and Treynor ratios are substantially higher for the high concentration stock portfolios. These results challenge the claims of target date funds. If the past performance of the asset classes is a useful guide, the probability that performance will be worse for a high fixed stock allocation is not only small but any underperformance is likely to be relatively modest.
Downloads
Downloads
Published
Issue
Section
License
Copyright (c) 2011 Academy of Financial Services
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Author(s) retain the copyright and full publishing rights without restriction.
Author(s) grant the Journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-NonCommercial 4.0 International License that allows reusers to distribute, remix, adapt, and build upon the material in any medium or format, for noncommercial purposes only. Reusers must acknowledge the work's authorship and initial publication in this Journal.
Noncommercial means not primarily intended for or directed towards commercial advantage or monetary compensation.
In addition, FSR grants to the UGA Libraries a worldwide, non-exclusive license to all content published by the Journal, including metadata, that is necessary to publish, transmit, and index the Journal and to preserve its content over time.
