Lifecycle fund

(redirected from Life-Cycle Funds)

Lifecycle Fund

Any mutual fund in a fund family that offers funds with varying levels of risk that are targeted at potential shareholders in different age groups. For example, a fund family may offer three lifecycle funds, one aimed at investors in their 20s and 30s, one at persons in their 40s and 50s, and one for those nearing or in retirement. In this situation, the first fund will carry the most risk because younger investors often seek to make a large return while the third will carry the least risk as investors wish mainly to protect their savings and pensions.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

Lifecycle fund.

A lifecycle fund, which is a fund of funds, invests in individual mutual funds that a fund company puts together to help investors meet their objectives without having to select individual funds.

Some companies offer a set of lifecycle funds, each with a different level of risk and return, from conservative to aggressive. In that case, you may choose a lifecycle that's appropriate for reaching your goals within the time frame you've allowed.

The typical pattern is for younger investors to choose a more aggressive lifecycle fund and those nearing retirement to choose a more conservative fund.

With target date funds, which are a type of lifecycle fund, you choose a target retirement year, and the fund manager invests and reallocates your money more and more conservatively as you near retirement.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
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Worden, 1999, Investors' Asset Allocations Versus Life-Cycle Funds, Financial Analysts Journal, 55(5): 37-43.
One reason for these funds' popularity is that in 2007 the Department of Labor passed a regulation that led many employers to use life-cycle funds as the defaults in 401(k) plans.
With life-cycle funds, the allocations for investors vastly improve."
Interested in life-cycle funds? "These funds are the easiest investments you can make, but you still need to do research to make the best decision," says Clark.
While all life-cycle funds start off aggressively and then grow more conservative, the rate of progression varies widely.
There are also short essays commenting on the challenges of life-cycle funds in the context of the financial crisis.
The product can also be applied to life-cycle funds or to asset-allocation programs.
Broadly diversified, balanced, and life-cycle funds are designed to be held for the long haul and are good portfolio anchors.