The leader in passive target funds has long been Vanguard Group, which charges 0.19% on some of its funds. Lately Vanguard has been attracting strong flows into its funds as more investors have abandoned active funds and shifted to passive choices.

The growth at Vanguard has encouraged competing target funds to lower fees and shift to passive strategies, says Eddie Alfred of BrightScope. "Vanguard has had the lowest fees in the institutional target-date field," Alfred says. "Other companies are making changes to meet the low-cost challenge."

Fidelity Investments introduced passive choices that match the Vanguard fees. Fidelity Freedom Index 2030 ( FXIFX) charges 0.19%. In comparison, Fidelity Freedom 2030 ( FFFEX), which uses active funds, charges 0.71%.

While many target funds hold collections of eight or more funds, Vanguard takes a simple approach, investing in just a few funds.

Vanguard Target Retirement 2050 ( VFIFX) has about 63% of its assets in Vanguard Total Stock Market Index ( VTSMX), 27% in Vanguard Total International Stock Index ( VGTSX) and 10% in Vanguard Total Bond Market II Index ( VTBIX).

"Target-date funds should be as straightforward as possible because they are designed for people who may not be deeply engaged in the investing process," says Scott Donaldson, a senior analyst in Vanguard's investment strategy group.

TIAA-CREF Lifecycle Index 2050 ( TFTIX) has investments in four funds. In contrast, the company's actively managed 2050 target-date fund has investments in 14 funds. The extra holdings may provide diversification, but they also come with higher fees.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.

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