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By Christine Benz and Christopher Davis | 10-11-2012 11:30 AM

Are Fidelity's Target-Date Funds on the Mark?

Senior analyst Christopher Davis highlights the key pluses and minuses of Fidelity's widely held Freedom Funds lineup.

Christine Benz: Hi, I'm Christine Benz for

If Fidelity manages your 401(k) plan, it's a good bet that it includes some Fidelity Freedom Funds. Joining me to share his insights on Fidelity's target-date lineup is Christopher Davis. He is a senior mutual fund analyst with Morningstar.

Chris, thank you so much for being here.

Christopher Davis: Well, thank you for having me.

Benz: Chris, let's start by talking about the key pluses of Fidelity's Freedom Funds lineup?

Davis: Well, I think the key plus is, you're getting a really seasoned management team, and that's important with any target-date fund. They're designing the fund's asset allocation, they're really … overseeing the quality of your investment experience. And so, you have folks that have been around for a long time, and they're backed by a huge team of asset allocation specialists. And I think Fidelity spends a lot of time getting the glidepath--which is the investors' transition from a stock-heavy to a bond-heavy portfolio, as they age--I think they spend a lot of time getting that right.

And one advantage Fidelity has as a big organization is they have a lot of data with the lot of participants, and they've tailored their glidepath based on how people actually behave. So they know investors have this tendency to panic when times are tough. So, their glidepath is a bit more conservative than perhaps the quantitative models would have indicated that they should be, just based on how investors actually have behaved.

Benz: Chris, you've noted that one difference with Fidelity's target-date lineup is that, for the near-dated funds, the ones that are more bond-heavy, they are more conservative than some of their peers. What's going on there?

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