Target-Date Fund

Target-date funds (TDFs) are designed to be the only fund you need for retirement investing. You pick the fund with the year closest to your expected retirement (e.g., a 2055 target-date fund if you plan to retire around 2055), and the fund automatically adjusts its mix of stocks and bonds over time.

When the target date is far away (30+ years), the fund is heavily weighted toward stocks (typically 85-90%) for growth. As the date approaches, the fund gradually shifts toward bonds and stable investments. By the target date, the allocation might be 40-50% stocks and 50-60% bonds. This automatic "glide path" implements the age-based asset allocation principle without requiring any action from you.

TDFs have become the default investment option in most 401(k) plans. They're ideal for investors who want a simple, hands-off approach. One fund provides global diversification across stocks and bonds, automatic rebalancing, and age-appropriate risk management.

The main considerations are: expense ratios vary widely (Vanguard target-date funds charge 0.08-0.12%, while some charge 0.50%+), glide paths differ between providers (some are more aggressive/conservative), and "to" vs "through" retirement approaches (some funds reach their most conservative allocation at the target date, others continue adjusting for 10-20 years after).

TDFs are less optimal for investors with unusual situations — very early retirement, highly variable income, significant outside investments, or specific tax optimization goals. For these cases, a custom asset allocation may be more appropriate.