Reader TTS

When 401(k) retirement plans were first rolled out, one thing was abundantly clear: Many investors simply didn’t have the knowledge or inclination to manage their money. Rather than a

do-it-yourself investment program, investors wanted a do-it-for-me plan.  The financial industry’s answer was target-date funds, which gear their investments toward a projected retirement

date — say, 2030 or 2045. As the date approaches, these mutual funds pare back their riskier holdings, such as stocks, and start to load the portfolio with less risky investments, such as

cash and bonds. Since their rollout in 1994, the funds have proven spectacularly popular, gathering millions of investors and nearly $3.3 trillion in assets by the end of 2021. The idea is

to make the portfolio sturdier and less risky as retirement approaches, because retirees have less income to make up for their fund’s losses. And it has worked reasonably well — until this

year.  The 10 largest funds aimed at people who plan to retire in 2030 have lost an average 20.4 percent, about the same as the Standard and Poor’s 500 stock index, according to

Morningstar, the Chicago investment trackers. Although this isn’t a reason to abandon target-date funds, it is a good reminder to look closely at how your fund manages your retirement money.

TOUGH MARKETS Normally, the prices of stocks and bonds move in opposite directions. Stocks are the wild-eyed optimists of the investment world, soaring when the economy booms, corporate

profits rise and interest rates fall. Unfortunately, when they fall, they fall hard. Not only have U.S. stocks suffered a 20 percent (or more) loss, overseas stocks got clobbered as well —

so diversifying worldwide, normally seen as prudent, only added to a target-date fund’s woes. Stocks in countries that use the euro, for example, have tumbled nearly 23 percent this year,

thanks to the war in Ukraine and the soaring dollar. Bonds, on the other hand, are only happy when it rains. A bond, like a bank CD, pays a fixed rate of interest to its owner. When

interest rates rise, investors spurn older bonds with lower interest rates, and the bond falls in value. Typically, a mix of stocks and bonds produces a less volatile ride over time, with

smaller gains than stock funds, but smaller losses, too.