Even target maturity funds have gotten spanked by bear market

— -- When people think of time travel, they usually want to journey back to 1977 so they can tell their sister to give that nice Billy Gates a break and go see Star Wars with him. These days, however, investors are probably hoping for a kind of Rip Van Winkle machine that will let them sleep a decade or so until their retirement savings recovers.

Investors who bought a target maturity fund aimed at retirement in 2020 sure could use an extra decade. The average 2020 fund has fallen 26% this year through Wednesday, vs. 31% for the Standard & Poor's 500-stock index with dividends reinvested.

Clearly, a 26% tumble trumps a 31% fall. But target maturity funds were sold as a widely diversified alternative for investors who didn't have the time or inclination to run their own portfolios. And funds aimed at those who plan to retire in 12 years clearly call for a diversified portfolio. People who bought target 2020 funds were probably hoping for somewhat greater protection on the downside than what they got.

What went wrong? Some funds positioned themselves too aggressively and got badly spanked. But even highly diversified funds have been clocked, making the melancholy point that sometimes, nearly everything falls at once.

In theory, target maturity funds are a good idea. The funds start their lives loaded with stocks, which typically have the best long-term returns. As the fund's target date approaches, the manager shifts its assets into more sedate investments, such as bonds and money market securities, which are less likely to have a big tumble.

The big difference between most target maturity funds is the so-called glide path — the rate at which the fund reduces its stock holdings and increases its positions in bonds and cash. A more aggressive fund will have a short glide path, keeping its stock holdings relatively high until the target date is nigh. A more conservative fund will start paring back its stock holdings relatively early in its life.

Not surprisingly, many of the 2020 funds hit hardest had heaping helpings of stocks. Oppenheimer Transition 2020 fund, for example, had 61.5% in U.S. stocks and 20% in foreign stocks, for a total allocation of 81.5% in stocks. The fund plunged 34.5% this year through Wednesday.