One of the most important fiduciary duties of plan sponsors is meeting the needs of plan participants. You can take an important step by offering a diversified menu of investments. But even when an appropriate mix of investment options and investor education are offered, many participants fail to make good investment choices.
Common missteps by plan participants include:
- Insufficient diversification that concentrates risk in too few asset classes
- Inappropriate risk exposure that may be too aggressive or too conservative
- Failure to rebalance as portfolio allocations shift
These errors can significantly affect participants’ retirement results and their ability to pursue the retirement they envision.
Meet the Challenge with Target-Date Funds
With target-date funds, you can help them chart a path to retirement and avoid some of these common missteps. Typically employing a “fund of funds” structure, target-date funds invest in a variety of underlying stock, bond and cash alternatives. They also offer a built-in asset allocation strategy and professional investment management, making these comprehensive portfolios a practical solution to help participants save for retirement.
Target-date funds offer a single entry point into a broadly diversified, risk-managed portfolio. These professionally managed investments automatically adjust a participant’s asset allocation, pursuing more aggressive opportunities in the early saving years and becoming increasingly conservative as retirement approaches.
Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost.
Past performance is no guarantee of future results.
Diversification does not assure a profit or protect against a loss of principal.
Rebalancing allows you to keep your asset allocation in line with your goals. It does not guarantee investment returns and does not eliminate risk.
The opinions expressed are those of our investment professionals, and are no guarantee of the future performance of any American Century Investments® portfolio. This information is not intended to serve as investment advice; it is for educational purposes only.