When it comes to evaluating target date fund performance, the default has typically been to compare a fund’s total return to that of other funds in its peer group since these rankings are readily available. However, these simple rankings do not account for different asset allocations and risk levels between funds in the same peer group.
In a recently published white paper, Wells Fargo Advantage Funds outlines a methodology it believes to be more effective in evaluating target date fund performance, an approach that is based on both absolute and risk-adjusted measures.
A Roadmap for Evaluating Target Date Fund Performanceprovides a three-step monitoring process intended to be comprehensive yet actionable.
“Three steps and five statistics form the basis of our approach to a more accurate evaluation of target date fund performance,” said
Financial professionals and plan sponsors can obtain a copy of A Roadmap for Evaluating Target Date Fund Performance by visiting www.wellsfargoadvantagefunds.com/roadmap.
The target date represents the year in which investors may likely begin withdrawing assets. The funds gradually seek to reduce market risk as the target date approaches and after it arrives by decreasing equity exposure and increasing fixed-income exposure. The principal value is not guaranteed at any time, including at the target date.
Stock values fluctuate in response to the activities of individual companies and general market and economic conditions. Bond values fluctuate in response to the financial condition of individual issuers, general market and economic conditions, and changes in interest rates. In general, when interest rates rise, bond values fall and investors may lose principal value. The use of derivatives may reduce returns and/or increase volatility. Certain investment strategies tend to increase the total risk of an investment (relative to the broader market). This fund is exposed to foreign investment risk, mortgage- and asset-backed securities risk, smaller-company investment risk, and allocation methodology risk (risk that the allocation methodology of the Dow Jones Target Date Index, whose total returns the fund seeks to approximate, before fees and expenses, will not meet an investor’s goals). Consult the fund’s prospectus for additional information on these and other risks.
“Dow Jones®” and “Dow Jones Target Date IndexesSM” are service marks of
Carefully consider a fund's investment objectives, risks, charges, and expenses before investing. For a current prospectus and, if available, a summary prospectus, containing this and other information, visit wellsfargoadvantagefunds.com. Read it carefully before investing.
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NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
Wells Fargo Advantage Funds