target-date fund

A mutual fund or exchange-traded fund (ETF) that provides a diversified portfolio and alters its allocation as shareholders approach the date when cash withdrawals will be taken. Target-date funds are specifically designed to provide a simple investment solution for people who are saving for retirement. Target-date funds are funds of funds; they do not hold individual securities. As the target date in the fund's name moves closer, its composition becomes more conservative to adjust for the level of risk the fund sponsor believes shareholders should be taking. The actual allocation and how often the allocation changes vary from fund to fund. Furthermore, at the target date, a fund can either adopt a final allocation or continue to evolve. Long-term investors utilize target-date funds to reduce the amount of risk as they move toward their retirement date.