Target-Date Fund
Financial term in the Retirement category
Definition
A mutual fund that automatically adjusts its asset allocation from aggressive to conservative as a target retirement year approaches. Often used as a simple, hands-off investment option in 401(k) plans.
Related Terms
Glide Path
The gradual shift in a portfolio's asset allocation from aggressive (more stocks) to conservative (more bonds) as the investor approaches retirement. Target-date funds use predetermined glide paths to automatically adjust risk over time.
Asset Allocation
An investment strategy that balances risk and reward by dividing investments among different asset categories, such as stocks, bonds, and cash, based on goals and risk tolerance.
401(k)
A tax-advantaged retirement savings plan offered by employers that allows employees to contribute a portion of their salary before taxes. Many employers offer matching contributions up to a certain percentage.
Frequently Asked Questions
What is Target-Date Fund?
A mutual fund that automatically adjusts its asset allocation from aggressive to conservative as a target retirement year approaches. Often used as a simple, hands-off investment option in 401(k) plans.
Why is Target-Date Fund important in personal finance?
Target-Date Fund is an important retirement concept that helps individuals make better financial decisions. Understanding Target-Date Fund can improve your financial planning and help you achieve your money goals.
How does Target-Date Fund relate to Glide Path?
Target-Date Fund and Glide Path are related financial concepts. The gradual shift in a portfolio's asset allocation from aggressive (more stocks) to conservative (more bonds) as the investor approaches retirement. Target-date funds use predetermined glide paths to automatically adjust risk over time.
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