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ETF and Mutual Fund Industry veteran Matt Patterson discusses the pros, cons, and differences of Target Date and Target Distribution Funds. Target Date Funds seek to grow assets over a certain time period (usually an investor’s retirement date) and adjust holdings as they get closer to that date.
In contrast, Target Distribution Funds may target a particular level of risk over time seek to provide predictable income stream for investors. One of the main problems with Target Date Funds is that they may be too conservative to finance an investor’s retirement years.
Let’s face it, people need income in their retirement years and being too conservative increases the risk that investors will outlive their funds. Target Distribution Funds offer investors a solution that provides predictable cash flow throughout their retirement years.