Some mutual fund families are bringing out so-called “target-timeline” funds that will become more conservative as a target retirement date approaches. Fidelity, Vanguard, and T. Rowe Price are among the entrants.
These funds are actually funds-of-funds that invest in other stock or bond funds from the same family. As the target retirement date comes closer, assets will be shifted from stock funds to bond funds and cash. Some years after the target date, each fund will merge into a retirement fund, which is long on bonds.
Some investors like the idea of a single-fund solution, geared around the date they expect to retire. Retirees may not be able to add new money to their portfolios, so less should be invested in volatile equities. Nevertheless, each of these funds keeps at least 20 percent in stocks, to help provide inflation protection and future growth potential.