Fidelity Investments recently notified investors in its Fidelity's Freedom funds about changes in its investment strategy. The Freedom funds are...

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Fidelity Investments recently notified investors in its Fidelity’s Freedom funds about changes in its investment strategy.

The Freedom funds are “life-cycle funds,” issues that age and become more conservative along with the investor. They invest in other Fidelity funds, and are designed as a one-size-fits-all choice, the kind of fund an investor is supposed to be able to put money into and forget about. But now, Fidelity Investments has changed the asset-allocation formula for its 2000 and 2010 funds to have more leeway to invest in junk bonds.

Daniel Smith, 59, who owns 2000 and 2010 portfolios, is alarmed by the change. He is a self-described “conservative investor” who would never invest in junk bonds on his own.

Moreover, he fears that the funds are moving away from their pre-determined strategy and investment objectives, chasing yields to goose returns while adding an extra level of danger. He dislikes the principle of changing the allocation formula, “because these are buy-and-hold, stay-the-course, average-things-out-in-the-end funds, and now I am exposed to the manager picking a good time to make some moves.”

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Smith’s concerns are understandable. Changes in strategy appear frightening because the sales pitch that brought the investor in involved a safe, static approach.

For its part, Fidelity laid out portfolio alterations — adding some new small-cap and value funds beyond increasing the junk-bond leeway. Fidelity officials said the changes are part of ongoing evaluations of the best investment mix and based on the experience of shareholders in the funds; if the aim of a life-cycle fund is to provide a safe, secure journey, the demographics of the shareholders play a part in setting the agenda.

As a result, changing the process is no big deal.

“It is OK to rethink things as the world changes,” said Roger Gibson of Gibson Capital Management in Pittsburgh, one of the investment world’s leading asset-allocation experts. “Think back 10 years and how you might have set up an allocation strategy then, and [with] what you have learned since [you] would almost certainly have wanted to make some adjustments. It’s probably a good thing when management says it wants to work the portfolio because they have another decade of experience under their belts.”

Even Smith acknowledges that a 5 percent allocation to junk in one fund is not going to make or break his retirement. The change is subtle enough that he’ll be hard-pressed to notice a significant change in future performance, but that doesn’t make him feel more comfortable.

Therein lies a key weakness of the life-cycle funds. Most of these funds are ultra-diversified, sticking to rough allocation guidelines.

“You get a black-box approach, and some people get a look inside and find out they don’t actually like what is in there,” says Jim Lowell, editor of the Fidelity Investor newsletter.

A life-cycle fund might be an ideal choice for some, but an uncomfortable choice for Smith. In the end, anyone considering a life-cycle fund needs to know as much about themselves as they know about the funds. Chuck Jaffe is senior columnist at CBS Marketwatch. He can be reached at jaffe@marketwatch.com or Box 70, Cohasset, MA 02025-0070.