If ever there was a low-maintenance retirement plan product, the target-date mutual fund is it.
Tailor-made for those who prefer to put their investment portfolios on autopilot, such funds automatically adjust their asset mixes to become more conservative as investors approach retirement age.
Assets held in target-date funds, also called life-cycle or age-based funds, crossed the $500 billion threshold in 2013, according to fund tracker Morningstar. Demand for such products, especially among 401(k) plan participants, shows no signs of slowing, according to financial experts.
Asset-management consulting firm Casey, Quirk & Associates forecasts that target-date funds will represent nearly half of the projected $7.7 trillion in U.S. defined contribution assets by 2020.
While target-date funds may make long-term investing easy, the products themselves are anything but simple, said Jeremy Stempien, director of investments for Morningstar's Investment Management division.
For example, each of the more than 600 existing target-date funds comes with its own fee structure, risk profile and asset mix, making performance measurement against any one index virtually impossible.
"You'd like to be able to look at one 2015 target-date fund versus another, but it's not like comparing two large-cap funds," Stempien said. "They can be much more aggressive or conservative relative to their peers, depending on how they are structured."