NEW YORK ( Fabian Capital Management) -- Recently Blackrock announced it will be shuttering 18 ETFs, including 10 target-date funds that were designed to be used for long-term investors seeking an easy way to save for retirement.
It's not likely that many investors are going to miss these ETFs, as they only had approximately $310 million in total assets. No single fund totaled over $100 million.
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The idea behind this style of ETF is that investors pick an approximate retirement date that corresponds to a portfolio with a specific mix of stocks, bonds and cash. Then as you get closer to that date, the underlying assets are rebalanced to a more conservative mix that reduces equity exposure and increases fixed-income. This lowers volatility and increases the focus on capital preservation as you transition out of the workforce and into generating a sustainable income stream from your retirement portfolio.
This style of fund has been widely popularized by 401(k)'s and other defined-contribution plans that allow novice investors an easy way to stay allocated to the market without having to actively evaluate their holdings or make changes in response to their time horizon.
While I understand the goal, in practice this style of investing falls short of the typical savvy ETF investor who understands building a portfolio of assets in conjunction with an individual risk profile and investment objectives. It's just too plain-vanilla and hands-off for the majority of market participants.