Vanguard has introduced the Vanguard Target Retirement 2055 Fund, a target-date portfolio for investors 18 to 22 years old who plan to retire in 2055 or thereabouts.

The fund joins Vanguard's 11 other target-date offerings. It is riskier in nature, given the faraway retirement horizon; its initial allocation is about 90% to stocks and 10% to bonds. The fund will gradually shift toward bonds over time, with an expected allocation of 50% stocks-50% bonds when it reaches its target date — and an expected final allocation of 30% stocks-70% bonds seven years after the target date — the company said on Wednesday.

"Over the past few years, the stock market has dropped 57%, rallied 86% and subsequently declined 8%, leading to the potential for an entire generation to become wary of investing," Vanguard Chairman and CEO Bill McNabb said in a press release.

"We must encourage younger investors to participate in the financial markets at an early age, save at aggressive levels, keep an eye on investment costs and maintain a long-term focus," he said. "Target-date funds may be an ideal vehicle for many of these investors to help position their retirement savings for the long run."

The 2055 Fund is to invest in other low-cost Vanguard index funds and provide exposure to U.S. stocks and bonds, as well as to developed-country and emerging-market international stocks, the company said.

Its underlying funds invest in about 6,000-plus U.S. stocks and bonds and 2,000-plus international stocks.

Target-date funds have elicited a flurry of concern recently.

Problems began to surface in 2008, during the financial meltdown, when those nearing retirement lost a whopping 23% in their 2010 target-date funds. Investors had assumed that, as they got closer to their retirement dates, asset allocation within their funds would get more conservative. Many were shocked to find that half of their assets were still in equities, which are inherently riskier than fixed-income instruments, though they were scheduled to retire in two years.

Critics argue that these funds should be marketed more clearly and regulated so that investors know what they are buying.

Vanguard's Target Retirement funds had aggregate assets of nearly $67 billion at July 31 and $42 billion in target-date-fund cash flow, according to Strategic Insight.

The new fund's expense ratio is expected to be 0.19%, compared to the average expense ratio of 1.17% for target-date funds in that peer group as of July, according to Lipper Inc.

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