So instead of changing your investments and rebalancing your allocations manually over the years, “you can buy a single package called a target date index fund, which has those things inside it, and sets the asset allocation based on your age,” he says. But stocks can be risky and susceptible to sudden market swings, so as you age, it’s good to transition some of your investment toward bonds, which are lower-risk and provide income stability.Ī target date index fund manages that allocation and transition for you. A target date index fund is actively managed to alter the fund’s risk allocation as the target date approaches.įor example, if you’re young and have a long investing timeframe, you probably want to start with a portfolio heavily-allocated to stocks for their growth potential, Schneider says. Target date index funds are an investment strategy based on the target date, which is the year when you want to access your money and retire.
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