Investors are told they can avoid "diworsification," or being too diversified, by holding fewer active managers and seeking funds that have large positions in relatively few investments when they do hold active managers.

However, that prescription doesn't suit most investors, John Rekenthaler of Morningstar says. Only investors who are willing to take on additional idiosyncratic risk and have strong knowledge of the funds should concentrate their investments.

[profile]'s second launch of target date funds, this time more conservative, doesn't quite satisfy Rekenthaler, who quoted Ron Surz, president of Target Date Solutions:

"In 'Dante's Inferno, 'the hottest place in Hell is reserved for those who won't take a stand,' says Surz. 'Moving down to 42% [equities] at the target date is still pretty risky. I think [T. Rowe Price is] not getting the idea.'

For his part, Surz recommends a 0% weighting in stocks at the target date."  

Edited by: Casey Quinlan


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