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A target-date fund is an investment that automatically adjusts its risk level over time, becoming more conservative as you approach a specific retirement year.
In Depth
These funds are designed to simplify investing for retirement by providing a diversified portfolio that changes its mix of stocks and bonds. Early on, they hold more stocks for growth potential, then gradually shift to more bonds to reduce risk as the target retirement date nears. This 'glide path' aims to balance growth and capital preservation, making them a popular choice for 401(k) plans.
Example
If you plan to retire around 2050, you might invest in a 'Target-Date 2050 Fund.'