Which fund aims to adjust automatically toward a retirement objective by a known date?

Which fund aims to adjust automatically toward a retirement objective by a known date?

• A. Life Cycle or Target Date Fund
• B. Growth Fund
• C. Income Fund
• D. Sector Fund

Answer: (A)

Target-date funds are built to automatically adjust their asset mix as a specific retirement date approaches. They follow a glide path that starts with a heavier, growth-oriented allocation (more stocks) when the target date is far away and gradually shifts toward more conservative assets (more bonds and cash) as that date nears. This automatic rebalancing aims to align risk with your time horizon, reducing volatility and potential drawdowns as you get closer to retirement. Other fund types—growth, income, and sector funds—don’t automatically tailor a portfolio to a retirement date; they focus on growth potential, income generation, or exposure to a specific industry, respectively. So the fund that automatically moves toward a retirement objective by a known date is a target-date (life cycle) fund.

Target-date funds are built to automatically adjust their asset mix as a specific retirement date approaches. They follow a glide path that starts with a heavier, growth-oriented allocation (more stocks) when the target date is far away and gradually shifts toward more conservative assets (more bonds and cash) as that date nears. This automatic rebalancing aims to align risk with your time horizon, reducing volatility and potential drawdowns as you get closer to retirement. Other fund types—growth, income, and sector funds—don’t automatically tailor a portfolio to a retirement date; they focus on growth potential, income generation, or exposure to a specific industry, respectively. So the fund that automatically moves toward a retirement objective by a known date is a target-date (life cycle) fund.