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Do you include target-date funds in QuietGrowth Portfolios?

No, we do not include target-date funds in QuietGrowth Portfolios. We believe that there is no need to use target-date funds in our portfolios. The reason is that the client's need for a risk-optimised return over the long term is already met by our portfolios which consider the client's financial circumstances, including her age.

In addition to this, some of the key reasons for not preferring target-date funds are:

  • Lack of customisation: Target-date funds offer a one-size-fits-all approach to investing, which may not be appropriate for all investors. For example, some investors may have a higher risk tolerance or a different investment time horizon that may not be aligned with the target date of the fund.
  • Higher fees: Target-date funds often have higher fees than other types of investment options, such as index funds, which can reduce the overall returns for investors.
  • Limited investment options: Target-date funds typically invest in a limited number of underlying assets, which can limit diversification and reduce the potential for higher returns.
  • Inappropriate allocation risk if underperformance occurs: Target-date funds are designed to automatically adjust their asset allocation as the target date approaches, to reduce risk as the investor nears retirement. However, if the fund underperforms and thus the balance in the investor's account isn't enough to meet her post-retirement expenses, the pre-determined allocation change of the target-date fund to a lower risk can translate to the investor now having only a remote chance of achieving the expected returns required to meet the retirement objectives.

Refer to our Investment Methodology page for more information.