What is a target-date fund?

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Multiple Choice

What is a target-date fund?

A target-date fund is a single investment that is built to change its mix of assets over time as you approach a planned retirement date. At the start, it tends to hold a higher share of growth-oriented investments like stocks, aiming for long-term growth. As the target date gets closer, the fund automatically shifts toward more conservative holdings such as bonds and cash, reducing risk as you near retirement. This automatic adjustment, or glide path, means you don’t have to actively rebalance or trial-and-error your asset allocation yourself. It’s a convenient one-fund solution for retirement planning. Other options don’t fit because a target-date fund isn’t designed to guarantee a fixed annual return, it isn’t limited to cash, and it isn’t invested in a single sector.

A target-date fund is a single investment that is built to change its mix of assets over time as you approach a planned retirement date. At the start, it tends to hold a higher share of growth-oriented investments like stocks, aiming for long-term growth. As the target date gets closer, the fund automatically shifts toward more conservative holdings such as bonds and cash, reducing risk as you near retirement. This automatic adjustment, or glide path, means you don’t have to actively rebalance or trial-and-error your asset allocation yourself. It’s a convenient one-fund solution for retirement planning.

Other options don’t fit because a target-date fund isn’t designed to guarantee a fixed annual return, it isn’t limited to cash, and it isn’t invested in a single sector.

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