Life-Cycle Fund

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Definition of 'Life-Cycle Fund'

A life-cycle fund is a type of mutual fund that invests in a mix of stocks and bonds, and the mix of investments changes over time as the investor ages. This type of fund is designed to help investors achieve their retirement goals by providing them with a diversified portfolio that is appropriate for their age and risk tolerance.

Life-cycle funds are often marketed as a "set-it-and-forget-it" investment option, because the investor does not need to make any changes to the portfolio as they age. However, it is important to remember that life-cycle funds are still subject to market risk, and there is no guarantee that they will achieve the investor's desired return.

There are a few things to keep in mind when choosing a life-cycle fund. First, you need to decide how much risk you are comfortable with. Life-cycle funds with a higher allocation to stocks will have a higher potential return, but they will also be more volatile. Life-cycle funds with a higher allocation to bonds will have a lower potential return, but they will also be less volatile.

Second, you need to decide when you want to retire. Life-cycle funds are designed to gradually become more conservative as the investor approaches retirement. This is done by gradually increasing the allocation to bonds and decreasing the allocation to stocks.

Finally, you need to decide how much you want to invest. Life-cycle funds are available in a variety of sizes, so you can find one that fits your budget.

If you are not sure which life-cycle fund is right for you, it is a good idea to talk to a financial advisor. They can help you assess your risk tolerance and retirement goals, and they can recommend a fund that is appropriate for your needs.

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