FLADX
2040 Franklin LifeSmart Retrmnt Trgt-A
Strategic Asset Allocation for Future Retirees
The 2040 Franklin LifeSmart Retirement Target-A (FLADX) is designed for investors planning to retire around the year 2040. This target-date fund employs a strategic asset allocation approach, aiming to provide the highest level of long-term total return consistent with its asset allocation strategy. As investors approach retirement, the fund gradually shifts its asset mix from higher-risk investments like equities to more conservative options such as bonds and cash. This glide path is intended to reduce risk as the target date nears, making it a suitable choice for those looking to balance growth potential with risk management as they prepare for retirement.
At A Glance
Executive Summary
FLADX offers strategic asset allocation for 2040 retirees with a 0.70% expense ratio, focusing on growth and risk balance.
Strategic asset allocation for 2040 retirees. Balanced growth and risk management. Diversified across equities and bonds.
Higher expense ratio than some peers. Negative alpha and Sharpe ratio. Potential underperformance in volatile markets.
Performance Analysis: Navigating Market Conditions
FLADX has demonstrated a mixed performance over recent years. With a one-year return of 24.94%, it has shown strong short-term growth, although its three-year annualized return of 3.95% suggests some volatility. The fund’s performance is benchmarked against the S&P 500 Total Return Index, which had a one-year return of 37.62%. This indicates that while FLADX has performed well, it has not kept pace with the broader market index. The fund’s alpha of -12.72% and Sharpe ratio of -1.27 further highlight challenges in achieving risk-adjusted returns, suggesting that investors should consider these metrics when evaluating the fund’s performance.
Portfolio Composition: A Diverse Mix of Assets
FLADX’s portfolio is diversified across various asset classes, with a significant allocation to U.S. equities at 51.65% and non-U.S. equities at 28.75%. Bonds make up 17.14% of the portfolio, providing a balance between growth and income. The fund’s top holdings include Franklin U.S. Core Equity Advisor and Franklin International Core Equity Adv, which together account for over 33% of the portfolio. This diverse mix aims to capture growth opportunities while managing risk through exposure to different markets and sectors. The fund’s sector allocation is heavily weighted towards technology (25.76%) and financials (14.68%), reflecting a focus on sectors with strong growth potential.
Risk Metrics: Understanding Volatility and Drawdowns
Investors in FLADX should be aware of the fund’s risk metrics, which provide insight into its volatility and potential for loss. The fund has a beta of 0.76, indicating lower volatility compared to the benchmark S&P 500 Total Return Index. However, its negative alpha of -12.72% suggests that it has underperformed relative to its expected returns. The fund’s maximum drawdown of -6.5% and a downside risk (UI) of 1.55 highlight the potential for significant losses during market downturns. These metrics underscore the importance of considering risk tolerance and investment horizon when investing in FLADX.
Comparative Analysis: How FLADX Stacks Up Against Peers
When compared to similar target-date funds, FLADX presents a competitive yet challenging profile. Its expense ratio of 0.70% is higher than some peers, such as the 2040 Voya Target Retirement-A (VTRJX) with an expense ratio of 0.65%. In terms of returns, FLADX’s one-year return of 24.94% is slightly lower than the 2040 Putnam Retirement Advantage-A (PCCLX), which posted a 28.46% return. Despite these differences, FLADX offers a unique asset allocation strategy that may appeal to investors seeking a specific balance of growth and risk management as they approach retirement.
Sector and Market Cap Allocation: Targeting Growth Opportunities
FLADX’s sector allocation is strategically positioned to capitalize on growth opportunities, with a significant focus on technology (25.76%) and healthcare (12.36%). These sectors are known for their potential to drive long-term growth, making them attractive components of the fund’s portfolio. Additionally, the fund’s market cap allocation is skewed towards large-cap (30.05%) and extra-large-cap (32.25%) stocks, which are typically more stable and less volatile than smaller companies. This allocation strategy aims to provide a balance between capturing growth potential and maintaining stability, aligning with the fund’s objective of long-term total return.
Expense Ratio and Yield: Balancing Costs and Income
FLADX has an expense ratio of 0.70%, which is relatively high compared to some of its peers. This cost can impact net returns, making it an important consideration for investors. However, the fund offers a yield of 1.61%, providing a modest income stream that can be appealing to those seeking regular payouts. The balance between the expense ratio and yield is crucial for investors who are evaluating the fund’s overall cost-effectiveness and income potential. While the expense ratio may be a deterrent for some, the yield offers a compensatory benefit for income-focused investors.
Conclusion: Is FLADX the Right Choice for Your Retirement Portfolio?
The 2040 Franklin LifeSmart Retirement Target-A (FLADX) stands out for its strategic asset allocation tailored for investors nearing retirement in 2040. While it offers a balanced approach to growth and risk management, potential investors should weigh its higher expense ratio and recent performance challenges against its diversified portfolio and income potential. FLADX is particularly suitable for those who prioritize a structured glide path towards retirement, offering a mix of equities and bonds that adjust over time. Investors seeking a fund that aligns with their retirement timeline and risk tolerance may find FLADX to be a compelling option, despite its competitive landscape.
Similar Securities
LIKAX: 2040 BlackRock LifePath IxFd-InvA | Strategic Asset Allocation for Future Retirees
LIKAX offers strategic asset allocation for 2040 retirees with a 0.39% expense ratio, focusing on equities and bonds for balanced growth.
STLEX: 2040 BlackRock LifePath Dynamic-Inst | Diversified Retirement Fund
STLEX offers a diversified global asset allocation with a 0.59% expense ratio, ideal for retirement planning with a 2040 target date.
LEKAX: 2040 BlackRock LifePath ESG IxFd-InvA | ESG-Focused Retirement Fund
LEKAX offers ESG-focused asset allocation for 2040 retirees with a competitive 0.5% expense ratio and diversified holdings.
FLADX: 2040 Franklin LifeSmart Retirement Target-A | Strategic Asset Allocation for Future Retirees
FLADX offers strategic asset allocation for 2040 retirees with a 0.70% expense ratio, focusing on growth and risk balance.
PRVLX: 2045 Putnam Sustainable Retirement-A | Sustainable Growth & Income
PRVLX offers a sustainable investment approach with a 0.32% expense ratio, focusing on growth and income as it nears 2045. Strong ESG integration.
Futher Reading
https://www.morningstar.com/funds/xnas/FLADX/quote
https://finance.yahoo.com/quote/FLADX/”>Yahoo: 2040 Franklin LifeSmart Retrmnt Trgt-A
https://ftcloud.fasttrack.net/web/chart/FLADX
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