Americans today allocate a larger share of their wealth to the stock market than in previous decades, a shift largely driven by the rise of target date funds (TDFs). These funds, which automatically adjust their asset mix as investors age, have become the default option in many workplace retirement plans since the mid-2000s. 

Research from MIT Sloan suggests that the widespread adoption of TDFs has led younger investors to hold more equities than they might have otherwise. The 2006 Pension Protection Act played a key role in this trend by allowing employers to use TDFs as default retirement investments, increasing participation in equity-heavy portfolios. 

While the impact of TDFs is strongest in the early years of enrollment, many older investors have also gradually shifted toward similar investment strategies. As TDFs continue gaining popularity, they could contribute to market stability by influencing stock price movements and reducing volatility over time.

Finsum: The default 60/40 portfolio is too passive for many young investors and holding larger equity younger, could accelerate their savings.