Choosing the Right Mix: Lessons From Life Cycle Funds

    by William W. Jennings

    Choosing The Right Mix: Lessons From Life Cycle Funds Splash image

    Life cycle funds are a relatively new but growing phenomenon in the U.S. Each life cycle fund represents a diversified fund of mutual funds that a mutual fund family recommends for typical individuals who anticipate retiring on a specific target retirement date.

    For example, the T. Rowe Price 2020 Retirement Fund is a fund of funds that contains several stock funds and bond funds. It is designed as an all-in-one portfolio for typical individuals retiring in 2020. As the retirement date approaches, the portfolio becomes more conservative. In addition, T. Rowe Price provides life cycle funds for individuals retiring in 2045, in 2040, and so on through a portfolio for those who retired in 2005, plus a separate “income” fund for individuals who retired in 2000 or earlier.

    This article analyzes life cycle funds at four major mutual fund families to extract the consensus professional thinking about prudent asset allocations through a typical individual’s life cycle. The fund families are AllianceBernstein, Fidelity, T. Rowe Price, and Vanguard.

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    → William W. Jennings