Exploring the pros and cons of target date funds

Herein, we explore the potential performance of both fixed allocation and target date strategies using one, five, IO, 20, and 40 year bootstrapping windows. We find not only that the mean accumulations and annuity values rise with the stock allocation percentage but also that both the Sharpe and Treynor ratios are substantially higher for the high concentration stock portfolios. These results challenge the claims of target date funds. If the past performance of the asset classes is a useful guide, the probability that performance will be worse for a high fixed stock allocation is not only small but any underperformance is likely to be relatively modest.