Target date fund


Also found in: Acronyms.

Target Date Fund

A fund of funds that invests predominantly or exclusively in mutual funds with a certain maturity. For example, a target date fund may hold funds with securities that all mature in 2015. A target date fund is useful when one wishes to have all of one's investments mature on the date of one's retirement.

Target date fund.

A target date fund is a fund of funds that allows you to link your investment portfolio to a particular time horizon, typically your expected retirement date.

In fact, a target date fund characteristically has a date in its name, such as a 2015 Fund or a 2030 Fund.

A target fund aiming at a date in the somewhat distant future tends to have a fairly aggressive asset allocation, with a focus on growth. As the target date approaches, the fund is designed to become more conservative to preserve the assets that have accumulated and eventually to provide income.

Each fund company formulates its own approach to risk, so that the allocation of one 2025 Fund may be noticeably different from the allocation of a 2025 Fund from a different company.

You can find model portfolios and statements of investment strategy in the fund's prospectus. Each mutual fund company that offers target date funds tends to offer a series, with dates five or ten years apart.

Most companies populate their funds of funds with individual funds from their fund family, though some companies add mutual funds or exchange traded funds from other investment companies.

Like other funds of funds, the fees you pay for a target date fund may be higher than you would pay to own each of the individual funds separately. However, these fees pay for an additional level of professional oversight.

References in periodicals archive ?
The growth of target date fund assets in 401 (k) plans from 2006 to 2013.
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For good reasons, target date funds are the most popular default option used by DC plans as well as one of the most important innovations for DC plans in the last decade.
In an accompanying letter, the Department of Labor today confirmed that target date funds serving as default investment alternatives may include annuities among their fixed income investments.
Although target date funds aim to preserve capital as the target date approaches, there is no guarantee that the fund will achieve this objective.
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Nine of the firm's target date funds were honored - six for multiple time frames and three for single periods.
As target date funds continue to garner an increasing percentage of 401(k) contributions, it is critical plan sponsors understand how differently they may manage risk over time," said Anne Lester, Global Head of Retirement Solutions and 2014 Morningstar U.
More than nine of 10 workers find the target date fund concept appealing - and about one third very appealing.
Analysis Reveals Higher Adoption of Target Date Funds and Roth 401(k) Among Gen Y
SAN FRANCISCO -- Callan Associates is making its Callan Target Date Index publicly available through an interactive tool that enables defined contribution plan sponsors, target date managers and plan participants to quickly and easily evaluate how their target date fund (TDF) performed against all others in the glidepath universe1.
An Industry-Leading Program Helps Retirement Advisors Steer Plan Sponsors Through An Increasingly Complex Target Date Fund Universe