Target Date Fund
A single fund that automatically shifts from stocks to bonds as you approach a target retirement year.
Target date funds (TDFs) like Vanguard’s Target Retirement 2055 or Fidelity Freedom 2055 hold a mix of stock and bond index funds, gradually shifting more conservative as the target year approaches (a ‘glide path’). They are the default investment in most 401(k) plans under the Pension Protection Act of 2006. Vanguard’s TDFs charge around 0.08%; some legacy fund family TDFs charge 0.5% or more for the same job. One TDF is a perfectly reasonable entire retirement portfolio; the main risk is owning it alongside other funds and accidentally over-concentrating in bonds or U.S. equities.
A 60-second lesson that puts this term in context, alongside the others, lives inside the Finlo app.