The recession of 2008-2009 taught us that target date mutual funds may not provide investors with the protection that they had in mind when they made their initial purchase. The general expectation of target date mutual funds is that you are theoretically able to buy a mutual fund that will get more conservative as you get closer to retirement age.
However, many investors who had purchased 2010 Target Date funds lost anywhere from 10-30% in their target date funds, which would definitely qualify as 'less than ideal' if you were planning to retire in the past couple of years. Some people may assume that target date funds will shield you from big losses in the years before your retirement, but the truth is, the different funds offer different kinds of protection to investors. For instance, Fidelity target date funds increase bond holdings substantially as retirement comes closer, based on the logic that those seeking retirement will be concerned about protecting against losses. T Rowe Price, on the other hand, has a whole host of target date funds that hold more stocks, and are generally riskier, than other target date funds, so you should expect more volatility from their funds in the short-term, but higher price appreciate to compensate for that risk in the long-term.
Obviously, this should go without saying, but you should be sure to read thoroughly your investment prospectus before buying any security. Jim Yih at Group Benefits Online wrote a great article about target date funds, which you can read by clicking here: http://groupbenefitsonline.ca/a-target-date-fund-makes-investing-easy/ .
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