What are target date or lifecycle funds?
Target date funds, which are also called lifecycle funds, are designed to offer a convenient way to invest for a person expecting to retire around a particular date. A target date fund pursues a long-term investment strategy, using a mix of asset classes (or asset allocation) that the fund provider adjusts to become more conservative over time. Research shows that asset allocation is one of the most important factors in long-term portfolio performance. Target date funds are designed to help investors avoid some of the most common investment mistakes. Their features include: • Diversification across asset classes: Target date funds invest in a mix of asset classes, including stocks (equity), bonds (fixed income), and cash. • Avoiding extreme asset allocations: Research shows that some young workers invest very conservatively, by allocating all or almost all of their accounts to fixed income investments, while some participants nearing retirement invest very aggressively, allocating all
