While target date funds provide amateur investors with an easy way to save, critics argue many investors don’t understand the risks.

Critics point to the 2008 financial crisis, when many investors in the funds lost money — some as much as 41% of their assets — and were surprised, having believed target date funds guaranteed returns.

“Some of the wariness comes from either a misunderstanding or not fully acknowledging what a target date fund is designed to accomplish,” said David O’Meara, New York-based senior investment consultant at Towers Watson & Co.

“Target date funds are not intended to be a low-risk option,” he said. “You can and will lose money at times.”

Instead, the funds are meant to optimize returns over a lifetime, and because they invest in equities, the funds will “definitely fluctuate with the markets,” said Kevin Jestice, Valley Forge, Pennsylvania-based principal and head of Vanguard Institutional Investor Services, part of The Vanguard Group Inc.

“But with that fluctuation comes the greater potential for upside over the 30-year horizon of a retirement investor,” he said.

The losses during the crisis proved to be a hiccup in the long-term performance of investments, including target date funds.

Investors have recovered their losses, and in 2014, all target date funds posted gains, with the average 5%, according to a Morningstar Inc. 2015 report.

That said, it’s up to employers to educate “employees about how they should be taking on target date funds” or employ an adviser to “take on that role,” said Robert Korajczyk, professor of finance at Northwestern University’s Kellogg School of Management in Evanston, Illinois.

The conundrum, according to Mr. Jestice, is figuring out how to communicate the pros and cons of target date funds to employees.

Plan sponsors are doing “a pretty good job” of providing information to employees, but whether or not participants engage is up to them, he said.

“That’s more of a comprehension (or) an engagement issue than it is an information-available issue,” Mr. Jestice said.

Mr. O’Meara suggests “tiering the assets” visually in a retirement plan so employees can choose the type of investor they are, thereby making an informed decision in the selection process.

For example, if you’re a person who delegates, target date funds may be a good solution, he said, and if you’re comfortable making asset allocation decisions, there are other funds you can choose from.

He also insists on making clear the funds’ goals so participants will “feel confident when there are blips in the market” so they will “keep investing through those periods.”