These investment vehicles offer a diversified portfolio designed to adjust risk levels automatically as the investor approaches a specified retirement date. A typical portfolio initially emphasizes growth-oriented assets like stocks and gradually shifts towards more conservative investments, such as bonds, as retirement nears. For instance, a portfolio targeting a retirement year of 2050 would likely have a higher allocation to stocks in 2024 than a portfolio targeting 2030.
Such an approach offers a simplified investment strategy for individuals seeking long-term growth while managing risk throughout their working life. It eliminates the need for frequent portfolio adjustments, reducing the burden of active investment management. Historically, this method has proven valuable for investors seeking a “set-it-and-forget-it” strategy aligning with their retirement timeline.
