Before the invasion of the target date funds, most 401(k) plan investors were encouraged to leave their assets in funds that generally contained 100 percent stocks. Despite this, far too many employees opted for the “safety” of stable value funds. While the lack of volatility does indeed sound safe, it is anything but. For that reason, Congress passed the Pension Protection Act in 2006, which was, in part, meant to encourage retirement savers to move away from the “safety” of fixed income or stable value options into what many professionals acknowledged as more appropriate investments for long-term investors. Namely, equities.

The significance of these “more appropriate” investors is rarely discussed. Some simply assume the long-term superiority of equities. Others view them as a single arrow in the quiver of asset classes, neither better nor worse than any other arrow. The numbers, however, present a much less forgiving reality.

Investing for retirement is a very long exercise. We're not talking years, we're talking decades. And by decades, we're talking a lot closer to a century than not. For example, assuming a life expectancy of nearly 90 years, the number of years one invests for retirement is about 70 years. Of that, for at least 40 years, retirement assets are considered “long-term,” i.e., it will be at least five years before they are used. Those numbers emphasize the “long” in long-term.