What is a target date fund’s “glide path”?
The glide path is the asset allocation path that the target date fund follows to become more conservative over time. Since discussions of asset allocation usually focus on the percentage of the portfolio invested in equities, the glide path reflects the declining percentage of equities in the portfolio as it approaches and passes the target date. While glide paths differ based on the assumptions and calculations providers use in designing their funds, all target date fund glide paths provide for more exposure to equities for younger investors and more exposure to fixed income and cash for investors near retirement. As the illustrations show, many funds’ glide paths continue to adjust the funds’ equity exposure after the target date is reached. Some funds also actively manage asset allocations along the glide path within preset limits to respond to prevailing market conditions.
