The prospect of rising interest rates could make plan sponsors lose sight of the greatest risk to participants in target-date funds, along with the important reasons to invest in bonds.
A negatively yielding investment would seem to have no place in anyone’s investment portfolio. But there’s a sound reason why an allocation to international bonds—some with negative yields—is fundamental to Vanguard Target Retirement Funds.
Vanguard Investment Strategy Group’s Brian Scott explains why index funds make good underlying funds for a target-date fund. Unlike the children of Lake Wobegon, all funds are not above average.