OctaveWealth does not offer Target Date Funds because we believe they add fees, are too simplistic, and have limited fund choices.
We are an ERISA 3(38) Fiduciary, so everything we do is and has to be in the best interest of the you, the participant. To that end, we have our own in-house investment committee. They create managed portfolios that are appropriate for retirement accounts and match each participant's level of risk.
Added fees
Target Date Funds are funds of funds, consisting of other mutual funds. Those mutual funds have their own expense ratios. When you look at the overall expense ratio of a Target Date Fund, it includes the mutual fund expense of those funds that it holds and an additional administration fee of 0.10% to 0.15%.
The average Target Date Fund had a 0.73% expense ratio in 2015, according to a report by Morningstar, a leading provider of independent investment research.
Too simplistic
The allocation in a Target Date Funds is solely based on your age and the number of years you have left before retirement age (your retirement time horizon).
But your age is just a single data point and isn't as effective as using your retirement time horizon in conjunction with other metrics like your risk tolerance, savings in other accounts, spending habits, other assets, compensation changes, and income changes.
Limited fund choices
Most conventional Target Date Funds from a company (Fidelity, T. Rowe Price, etc.) also exclusively use mutual funds from that same company, which means they may not hold the best fund for a particular category.
At OctaveWealth, we’re not wedded to any individual fund manager and can use the best funds as appropriate.