Riding a rising trend, in 2025 about 60% of individual IRA investors invested in single fund Target Date Funds.

Why the popularity? It’s all about fear and simplicity.

First the Simplicity

Target Date Funds take your planned retirement date into account and automatically adjust your mix of equities and bonds as you approach retirement—so your portfolio evolves without you having to lift a finger.

And then there’s the Fear

As retirement draws closer, the fear grows—what if one ugly market year wipes out everything you’ve worked for? This fear leads many investors to retreat to the popularity and perceived safety of Target Date Funds.

To protect themselves, most investors pull back hard, sliding from aggressive to conservative to ultra-conservative allocations.

But are Target Date Funds really the Optimal Solution?

Playing it too safe with overly conservative allocations can leave investors missing out on long-term growth opportunities.

A Rules-Based Approach

Historically, many of the popular portfolio allocations, like Target Date Funds, have offered some growth but surprisingly also exposed investors to significant downside risk - the very risk they were designed to help counter.

Could a rules-based approach, like the WavRyder Signal, have historically provided a different balance between risk and reward — allowing exposure to market upswings while helping to soften the impact of downturns? To explore this, we conducted back-tests covering as much as the last 60 years to reduce the influence of recency bias.

In historical back-tests, applying the WavRyder Signal highlighted periods where a rules-based signal behaved differently than typical conservative Target Date Funds, producing historically different outcomes from both a risk and reward standpoint.

These back-tests illustrate how the Signal interacted with market conditions over time, offering an additional perspective for investors to consider. The rest of this briefing will walk you through those historical results and explain why we are excited about our subscription-based WavRyder Signal publication — which provides investors with another way to monitor market conditions and think about potential opportunities and risks in their portfolios. Or, as we like to say, to “Ride the Wave and Dodge the Storms.”

At the close of every trading day, we publish the WavRyder Signal — a simple Green or Red indicator generated from a 60-year back-test model.

No noise. No guesswork. No Complex Interpretation Necessary.

That’s the WavRyder Signal in a nutshell.

Note: Our signals are designed to inform, not instruct. We do not provide individualized investment advice or recommendations. The signals are generated from a long-term, 60-year back-test and are shared as general information for you to evaluate within your own investment approach. This material is educational in nature, is not tailored to any specific investor, and should not be the sole basis for investment decisions. Always consider your unique financial situation and consult with a qualified financial professional before making investment choices.

Now let’s dive a bit deeper into the numbers, using a 20-year stock market back-test.

A simple comparison of the two portfolios:

In a 20-year back-test, a hypothetical $400,000 investment in a WavRyder-adjusted portfolio showed higher historical returns than a traditional Target Date Fund in the model.

During the back-test, the WavRyder Signal highlighted periods of market weakness, which the model reflected as temporary cash allocations. This analysis is illustrative and provided for educational purposes only; it does not constitute individualized investment advice or a recommendation.

The WavRyder Difference | “Ride the Wave…Dodge the Storms”

The below graph is a 20-year comparison of annual returns on both the standard Target Date Fund 10 years away from retirement and a combination of the three major index ETFs - one-third invested in each of the Dow, Nasdaq and the S&P 500 index ETFs.

Most investment models do well when market returns are positive.
When the S&P 500 growth is above zero, most portfolios generally grow with it. But historical dips below zero reveal why managing downside risk is so important — losses can accumulate quickly, and volatility can create stress for investors.

The challenge of traditional approaches.
Target Date Funds and other conventional portfolios tend to follow the market up and down. While this approach captures growth, it also exposes investors to periods of steep losses, which historically can make early retirement years more precarious.

Adding perspective with the WavRyder Signal.
Back-tests spanning 60 years show how the WavRyder Signal interacted with broad-based portfolios. In the model, the Signal highlighted periods of market strength and weakness, providing a rules-based perspective for potential adjustments. These historical insights illustrate how a disciplined approach could have altered exposure during volatile periods.

At the close of every trading day, we publish the WavRyder Signal — a simple Green or Red indicator generated from a 60-year back-test model.

That’s it. No complicated charts. No complex products. Just a straightforward signal you can review alongside your own investment approach.

Important Note: The WavRyder Signal is provided for general informational and educational purposes only. It is not personalized investment advice, does not recommend any specific action (such as buying, selling, or moving to cash), and should not be the sole basis for investment decisions. Every investor’s circumstances are unique, and we encourage you to consider your personal financial situation and consult with a qualified financial professional before making investment choices.

Want to know a bit more about how this WavRyder Signal works? Let’s do a deeper dive comparison of the WavRyder to the very popular Target Date Fund

In this analysis, we back-test the application of the WavRyder Signal to the historical performance of Target Date Funds over the last 20 years.

The methodology: during the back-test, periods indicated as a “Red Light” by the Signal were treated as hypothetical cash allocations in the model. When the Signal showed a “Green Light,” the model hypothetically returned to (or stayed invested in) the Target Date Fund.

This back-test is illustrative: it does not reflect actual investment recommendations or suggest specific actions for investors. Over the 20-year period, the model would have been in cash roughly 44% of the time. While sitting in cash historically may seem like it would reduce long-term growth, the back-test illustrates how the Signal interacted with market conditions across the period.

In this apples-to-apples comparison, the WavRyder Signal highlighted periods of market weakness where its model historically shifted into cash, reducing volatility and cushioning past drawdowns. While that approach naturally tempered long-term growth, the tradeoff showed how a rules-based system might smooth the ride for some investors.

But what if you could explore a balance between growth and defense? Imagine using a more aggressive allocation while treating the WavRyder Signal as an additional lens — one more piece of market context to weigh as you shape your own investment decisions.

Analysis #2 - Adjusting the Baseline

First, let’s compare the unadjusted Target Date Fund results over a 20-year back-test to four unadjusted broad-based market index funds, as follows:

The growth results are impressive—but the real concern lies in the steep one-year declines each fund experienced over the past 20 years, along with the elevated risk reflected in their Beta measures.

Many investors approaching retirement face challenges with portfolio drawdowns. For example, if retirement coincides with a historically severe market drop, the impact on retirement savings could be significant. Over consecutive downturns, historically, some investors may have experienced periods where recovery would take longer than expected if ever.

For those within 10 years of retirement, historical data shows that large drawdowns can create heightened stress and affect peace of mind. A primary goal for many investors is often balancing growth with downside mitigation.

In our illustrative 20-year back-test, we examine how the WavRyder Signal interacted with market conditions to provide insights on potential risk management, while maintaining exposure to market growth. This analysis is educational and does not constitute individualized investment advice or a recommendation.

In a 20-year back-test, applying the WavRyder Signal to broad-based market index funds showed reduced volatility and smaller drawdowns compared to static allocations. While Target Date Funds followed a different path, this historical analysis illustrates how a rules-based signal can provide another perspective for investors to consider.

The WavRyder Signal Adjusted Portfolios — Insights from a 20-Year Back-Test

Note: when we tested this analysis with a focus group of investors, the results were eye-opening. While participants recognized the strong back-tested returns of the WavRyder Adjusted Nasdaq Index, it wasn’t their favorite.

Instead, many gravitated to Fund 4 — a blend of three broad-based indices they knew and trusted. For retirement, diversification and historical downside protection mattered more to them than chasing the highest top-line growth. In their words, it felt like a “balanced” approach.

Historically, the WavRyder Signal has shown smaller drawdowns compared to a typical Target Date Fund. Its value lies in providing an additional perspective that investors can consider when evaluating risk and allocation decisions.

Note: Our signals are designed to inform, not instruct. We do not provide individualized investment advice or recommendations. The signals are generated from a long-term, 60-year back-test and are shared as general information for you to evaluate within your own investment approach. This material is educational in nature, is not tailored to any specific investor, and should not be the sole basis for investment decisions. Always consider your unique financial situation and consult with a qualified financial professional before making investment choices.