A mutual fund that aims to accommodate the requirements of a group of future retirees (investors who plan to a retirement target in the future). Tot that end, the share of each asset class, as a percentage of the entire fund, is automatically adjusted (with re-allocation) to fine-tune investment risk (and risk tolerance) as the target retirement date gets closer. By nature, this type of fund is a hybrid fund, i.e., which invests in both equity and debt. However, the percentage of debt and other fixed-income investments increases over time.
In this sense, target-date funds are age-based mutual funds that adjust their stock-bond allocations as an investor approaches or reaches retirement age.
Target-date funds are also called lifecycle funds.
