Target-date mutual funds were attacked in a recent study just as the government gave them its blessing as the default option in 401(k) plans...

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Target-date mutual funds were attacked in a recent study just as the government gave them its blessing as the default option in 401(k) plans.

The funds, which gradually shift out of stocks and into bonds to reduce risk, have mushroomed from 23 funds with $8 billion in 2000, to more than 250 with $160 billion under management, writes Andrew Clark, head of research for Lipper.

The appeal? They put retirement investing on autopilot.

While critics say target-date funds are a better long-term investment than money-market funds — the former default option when workers didn’t specify a choice — some say investors would fare better taking an active role.

A recent study from the Compass Institute, a think tank affiliated with Compass Investors, criticizes the structure of target-date funds. It advocates shifting asset allocations based on market and other trends, instead of on a fixed schedule.

Whether or not investors use target-date funds, they should review the information provided by employers, keeping a close eye on expenses, says Morningstar analyst Greg Carlson.

“I do think investors have to do a fair amount of legwork at the outset,” he says.

Randy L. Thurman, co-president of Retirement Investment Advisors, says target-date funds tend to be too conservative, with not enough exposure to stocks, including foreign companies. “What they are trying to get at is one size fits all,” Thurman says.

Carlson says T. Rowe Price’s funds are a bit more aggressive, in general, than those offered by Vanguard and Fidelity.

Vanguard economist John Ameriks thinks criticisms of target-date funds are overblown.

“There will always be a role for other investments,” he says. “Most 401(k) providers are saying, look, it’s a good thing when people make decisions. The problem was people weren’t making any decisions.”