The Top-Rated Life-Cycle Funds
Whether you are looking to retire in the next five years or 35 years, it is important to monitor your investment mix to be sure you are not taking too much or too little risk.
Early in your work life, it is easier to tolerate the volatility of the stock market in the search for the higher returns you need to build a solid base for your retirement nest egg.
The amount of risk you take should lessen as your portfolio grows and you get closer to retirement, however. Each year as you rebalance your portfolio, the allocation between bonds, stocks and other investments should be adjusted. Generally, the percentage of bonds should increase as the percentage of stocks decreases.
If you would rather spend time making money in your chosen profession than researching and managing a diverse portfolio of investments, the mutual fund industry has just the product for you.Several fund companies have created a series of funds that target specific years in which the investor is expected to retire and begin making significant withdrawals. Instead of directly holding individual stocks, these funds hold a range of mutual funds or index tracking portfolios. The minute-to-minute trading of stocks and bonds is left to the underlying fund managers, allowing the lifestyle funds to monitor and adjust the allocation between their holdings. The portfolio mix is systematically rebalanced on a set schedule to get more and more conservative over time. There are target retirement date funds as far out as 2050 for 20-somethings in their first job who plan to retire in their 60s. Below are comparisons of the year-to-date performance for funds tracked by TheStreet.com Ratings that target retirement dates of 2010, 2020, 2030 and 2040.
|Life Cycle Funds Ranked by Year-To-Date Performance
|Ticker||Fund||Rating||YTD Return thru 11/27|
|TRRAX||T. Rowe Price Retirement 2010 Fd||B-||10.36%|
|PENAX||Principal Inv LifeTime 2010 A||D+||9.59%|
|STLBX||Barclays Gbl Inv LifePath 2010 Fd I||C||8.82%|
|SATAX||State Farm LifePath 2010 LegA||C||8.45%|
|FFFCX||Fidelity Freedom 2010 Fd||C||7.87%|
|STNRX||Wells Fargo Avtg DJ Tgt 2010 A||D+||7.37%|
|TRRBX||T. Rowe Price Retirement 2020 Fd||B||11.64%|
|PTBSX||Principal Inv LifeTime 2020 Sel||B-||11.35%|
|STLCX||Barclays Gbl Inv LifePath 2020 Fd I||C+||10.87%|
|SAWAX||State Farm LifePath 2020 LegA||C+||10.47%|
|STTRX||Wells Fargo Avtg DJ Tgt 2020 A||C-||9.69%|
|FFFDX||Fidelity Freedom 2020 Fd||C||9.40%|
|TRRCX||T. Rowe Price Retirement 2030 Fd||B||12.74%|
|STLDX||Barclays Gbl Inv LifePath 2030 Fd I||B-||12.36%|
|SAYAX||State Farm LifePath 2030 LegA||C+||11.94%|
|PTCSX||Principal Inv LifeTime 2030 Sel||B||11.90%|
|STHRX||Wells Fargo Avtg DJ Tgt 2030 A||C-||10.40%|
|FFFEX||Fidelity Freedom 2030 Fd||C||10.20%|
|STLEX||Barclays Gbl Inv LifePath 2040 Fd I||B||13.66%|
|SAUAX||State Farm LifePath 2040 LegA||B||13.19%|
|TRRDX||T. Rowe Price Retirement 2040 Fd||B||12.79%|
|PTDSX||Principal Inv LifeTime 2040 Sel||B||11.92%|
|STFRX||Wells Fargo Avtg DJ Tgt 2040 A||C||11.58%|
|FFFFX||Fidelity Freedom 2040 Fd||C+||10.62%|
|Source: TheStreet.com Ratings|
T. Rowe Price (TROW) topped three of the four lists. Its (TRRAX) T.Rowe Price Retirement 2010 fund has averaged total annual returns of 10.8% over the three years ending Oct. 31. The fund's strategy calls for allocating 66% of assets to stocks and 34% to bonds, with the current allocation of the underlying funds adding up to 29.5% domestic bonds, 51.5% domestic stocks, 12.0% foreign stocks and 6.5% cash as of Sept. 30, 2006.
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