Study Calls Out The Costs of Target Funds

Re-Printed from Wall Street Journal: Are investors paying too much for target-date funds? The funds offer a diversified portfolio that as a goal like retirement or college approaches. They are increasingly popular in 401(k)s and among younger investors. 

But an academic paper cites fees of an average of one-third of a percentage point annually. Instead of spending extrato have a target fund manage their asset allocation, investors should replicate the portfolios using cheaper exchange traded funds, the authors write in “Of Target: On the Underperformance of Target-Date Funds.”