When Target-Date Funds Miss the Mark

Fair enough. And if the aim is to coax unsophisticated long-term investors away from cash, he's doing them a big favor. Cash is a terrible long-term investment.

But that makes his funds a very different vehicle from those offered by companies such as Fidelity and T. Rowe Price, which are much more heavily weighted toward equities and other asset classes. These are seeking to offer greater long-term returns in exchange for greater volatility. They have, inevitably, done best over the past few years.

Jan Dahlin Geiger, a certified financial planner in Atlanta, says most target-date funds are too conservative anyway. "Most of them basically have you dying 10 or 15 years after you retire," she says. As a result, they move too much money into bonds too early. Most people, she says, should plan to live to be 90 or 100 years old, and that means keeping more stocks in their portfolio for longer.

Geiger believes there are better options than a target-date fund. But she says you should add 10 or 20 years to the target date if you do invest in one.