The Internet is buzzing with retirement planning news lately. So much has written about target-date retirement funds in the US and they are approaching one trillion dollar mark. The target-date funds are specific in that they are intended to cater to a group of people who will be retiring at a certain age and date. As a result they are geared to younger investors than to those who are nearing retirement. Also, they are preferred by many agencies which are using mutual fund companies for their employee retirement funds.
Three biggest target-date fund operators include Fidelity Investment, Vanguard and T. Rowe Price. Funds are invested in stocks and bonds globally and tiered to gradually levitate to more bonds and fixed income assets when the participant getting closer to retirement. This strategy appeals to more investors than typical mutual funds and require minimal adjustments during its life cycle. This is one reason why target-date retirement funds carry a lower expense ratio. As typical with mutual funds Vanguard charges the lowest net expense ratio compared to others. Trend seems to be catching up and becoming more popular with mutual funds and has the advantage of riding the market due to time horizon.