These investment vehicles offer a diversified portfolio designed to adjust risk automatically as the investor approaches a predetermined retirement date. A typical portfolio starts with a higher allocation to stocks for growth and gradually shifts toward a more conservative mix of bonds and other fixed-income assets as retirement nears. This “glide path” aims to minimize investment risk while maximizing potential returns during the accumulation phase and preserving capital closer to and during retirement.
Retirement planning can be complex and time-consuming. Diversified portfolios aligned with a specific retirement date simplify the process, requiring less active management from the investor. This automated approach removes the burden of frequent portfolio rebalancing and helps ensure a suitable asset allocation based on the time horizon. Such funds have gained popularity as a core holding in retirement accounts due to their ease of use and potential for long-term growth tailored to individual needs.
