Defined Contribution Insights
We regularly look at how our target date series has performed during challenging markets, especially relative to peers. The chart below shows all bear markets and corrections since the series’ launch on February 1, 2007.
American Funds Target Date Retirement Series® in down markets Peer rankings of the series during periods in which the Standard & Poor’s 500 Composite Index declined at least 10% (peak to trough), Class R-6 shares:
Data as of March 31, 2018. Source: Capital Group, based on data from Morningstar. A bear market is defined as a cumulative decline of 20% or more of the S&P 500 Price Return Index from peak to trough on a total return basis. A correction is defined as a cumulative decline of the S&P 500 Price Return Index of 10% to 20% from peak to trough. Average Percentile Rank represents an equal-weighted average of Morningstar category percentile ranks of all vintages of the series. Percentile ranks shown are based on Class R-6 shares starting with July 13, 2009, and Class A shares prior to that. See rankings for 1-, 5- and 10-year periods below.
We believe our glide path construction, strong underlying funds and low fees have contributed to the series’ strong results relative to peers during these downturns. Several of the series’ underlying equity and fixed income funds have shown a degree of resilience in down markets.
The series’ glide path also seeks to preserve wealth during difficult equity markets by moving to historically less volatile fixed income and dividend-paying equities as participants approach and enter retirement. This broadly diversified nature of the funds has helped them weather challenging market environments.
Morningstar Rankings as of March 31, 2018:
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
Although the target date portfolios are managed for investors on a projected retirement date time frame, the allocation strategy does not guarantee that investors' retirement goals will be met. The target date is the year that corresponds roughly to the year in which an investor is assumed to retire and begin taking withdrawals. Investment professionals manage the portfolio, moving it from a more growth-oriented strategy to a more income-oriented focus as the target date gets closer. Investment professionals continue to manage each portfolio for approximately 30 years after it reaches its target date.
American Funds Distributors, Inc., member FINRA.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.
Past results are not predictive of results in future periods.