Funds & wrappers
Target-date fund
Also called Lifecycle fund
A single fund that automatically shifts from growth assets to defensive ones as a set year approaches.
How it works
You choose the fund matching your intended retirement year and it manages the glide path for you, rebalancing continuously without any action on your part.
For someone who will not otherwise rebalance, the automation is worth a great deal more than the small extra cost.
Where it misleads people
Two funds with the same target year can hold very different allocations, and some de-risk far more aggressively than others. The year in the name is not a standard.
Related terms
- Glide pathA plan to shift gradually from higher-risk to lower-risk assets as a target date approaches.
- Asset allocationHow you divide money between asset classes — the decision that drives most of your long-run experience.
- RebalancingSelling what has grown and buying what has lagged, to return the portfolio to its target mix.
- Sequence-of-returns riskThe risk that poor returns early in retirement do lasting damage, even if average returns are fine.
More in Funds & wrappers
- Transaction costs
- Synthetic ETF
- Active management
- Private equity
- Active share
- Premium and discount
- Cash drag
- Portfolio turnover
All 25 Funds & wrappers terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.