A target date mutual fund (TDF) is a long-term investment fund that automatically adjusts to help investors reach their
retirement goals.
How it works
- TDFs are designed to be held until retirement.
- The fund's target date is the year the investor plans to retire.
- The fund's asset allocation shifts over time, becoming more conservative as the target date approaches. This is known as the fund's "glide path".
- TDFs may invest in stocks, bonds, ETFs, and other assets.
Benefits
- TDFs can help investors manage risk by diversifying their investments.
- TDFs can be a good option for investors who want a hands-off approach to retirement investing.
- TDFs can help investors manage risk by diversifying their investments.
Drawbacks
- TDFs are not risk-free.
- TDFs do not guarantee income in retirement.
- TDFs may not allow investors to adjust allocations if their risk tolerance changes.
Other considerations
- TDFs are often used as default funds in retirement plans.
- TDFs are subject to the risks of their underlying funds.
- TDFs are often used as default funds in retirement plans.