Can an investor lose money in a target date fund?
Yes. As with any investment, target date funds can lose money. The mix of assets in a target date fund is intended to diminish the risk of loss, but, as demonstrated by market events in 2008, sometimes stocks, bonds, and other assets in a target date fund’s portfolio may lose value simultaneously. The specific risks of investing in a particular target date mutual fund are disclosed in the fund’s prospectus. While target date funds are managed to reduce equity market exposure and, therefore, equity market risk over time, target date fund investors, like all investors, are exposed to market risk and other risks associated with the fund’s portfolio. A few insurance companies offer, for a fee, insurance features designed to preserve principal or guarantee income in retirement, but most target date funds today do not have this feature.
