DISQUS

Brian · 2 weeks ago

I am usually all for making things simpler and clearer for consumers, but i think this is unnecessary from the SEC side of things. Anyone that is investing money into the market should take enough of an interest in their finances to understand what type of products they are putting their money into.

Additionally I feel that institutions offering different asset allocations with their funds leads to greater competition. And in the end, it is the individual that needs to take responsibility for where they put their money and the expectations they hold for how it will grow in the future.

Mike Piper · 2 weeks ago

I think John Rekenthaler from Morningstar nailed it with his testimony: http://news.morningstar.com/articlenet/article....

I'm pretty much 100% in line with his suggestions regarding necessary plain-English, prominent disclosures.

tom · 2 weeks ago

I'm torn...

As an independent investor, I don't think they should be standardized. Some people might be more comfortable with the 72% domestic stock as opposed to 67.2%.

As an investor in a 401(k), where the target funds are managed specifically for my company and I have little insight into their investments other than what's provided on their fact sheet, I would like to see them standardized.

I invest in Vanguard's 2050 fund because it has low fees, is very straight forward, and I have enough invested to cover the minimum investment amount.

Financial Samurai · 2 weeks ago

Nope. Then where's the marketing edge? You know the answer.

If everything is the same, everybody will just go to the one with the biggest headstart, and the fund will grow too big and keel over.

FS

Steve · 2 weeks ago

I too am against standardization. Consumers should be allowed to choose what allocation they want. I am in favor of target funds in general, as my case study of 1 (myself) has clearly shown that consumers do not rebalance often enough. I am in favor of clearly disclosed fees, however.

kenyantykoon · 2 weeks ago

they must not be standardised because a company will have no edge over others. standardization will in some ways reduce returns because there are some areas that mutual funds will not be allowed to invest in. i am definitely for companies deciding what is best for their customers

Evan · 2 weeks ago

I dislike the standardization idea because different fund managers will have different ideas what allocation should be at what age..

freeby50 · 2 weeks ago

I do not think the asset distributions should be standardized.

Michael Harr @ TodayForward · 2 weeks ago

Standardization is a horribly bad idea. There must be some mechanism for fund companies to differentiate themselves AND each investment company has a different slant in their overall styles which impact risk/return profiles. For example, Fidelity as an investment house slants toward the growth side of things, Vanguard is a blend, and Franklin Templeton is more towards value. If you standardize between cash/stocks/bonds, are you also going to standardize between growth/blend/value? How about short/intermediate/long-term bonds? Foreign and domestic? Truly horrible idea.

Also, I'd say that the allocations are almost uniformly too aggressive in these funds. Savvy/seasoned/smart/choose and adjective investors will not go with target date funds because with few exceptions, fund companies stuff laggard funds inside of these funds-of-funds. This means that those holding these funds are more likely to be less educated in the area of investing and will generally be less able to deal with market volatility. In recognizing this, fund companies should lean towards the conservative end of the spectrum with their equities allocations. Yes, there is some return given up, but if investors get burned too badly with a market decline, they may exit equities altogether. Generally speaking, it's a far better thing to capture 70% of the market return and stay invested than to get 100% of the market return only to exit at the worst time (which is the norm for ill informed investors).

I'm not saying that people can't get educated about these things, but if you consider prior to the Pension Protection Act of 2006 that 401k participants favorite investments were (1) cash, (2) company stock, and (3) bonds, it's pretty clear that most of those buying these funds could use a little help...preferably from the fund companies and not the SEC.

By the way, doesn't the SEC have bigger fish to fry? How about the dark markets of derivatives and private securities? Isn't that kind of what got us into the Great Recession?