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Generally, 2020 target-date funds were conservative enough to cushion the market’s blow early in the year.
Illustration by Glenn Harvey
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For anyone who had been contemplating retiring in 2020, the first quarter couldn’t have been easy. Stocks fell 34% in 23 days as the pandemic took hold and the economy quickly weakened. These stomach-churning moments are when investors make some of their worst mistakes—the kinds of mistakes that automatic investment products, like target-date funds, try to circumvent. In 2020, they largely did.
As of Dec. 31, 2020, the average return of a vintage 2020 target-date fund was 10.8%, one percentage point lower than the 11.7% return for a balanced fund with a 50% to 70% equity allocation, according to data from Morningstar Direct. In the first quarter, 2020 target-date funds overall fell 10%, on average.