Under the Hood of “Target Retirement Date” ETFs

Michael Johnston — Mon, 25 May 2009 17:20:35 +0000

The exchange-traded fund industry has enjoyed explosive growth in recent years due to the significant advantages of these investment vehicles over traditional mutual funds and individual securities. Perhaps most notably, ETFs offer investors a cost-efficient mechanism to gain access to a diversified basket of securities. ETFs allow investors to create a well-diversified investment portfolio by holding only a handful of assets. A relatively new ETF innovation, however, takes this efficiency to the extreme – offering access to a complete portfolio through a single ETF. Under the Hood Target retirement date ETFs are the ultimate in a passive, buy-and-hold investment strategy. An investor simply selects the fund that corresponds to his or her intended retirement date (e.g., 2035 fund) and allows the ETF managers to do the rest. I should note that this concept is not altogether new – anyone with a 401(k) knows of numerous mutual funds operating under the same premise [...]

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Under the Hood of “Target Retirement Date” ETFs

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