What is a target-date fund?
A target-date fund (TDF) is a single mutual fund that holds a diversified mix of stocks and bonds and automatically becomes more conservative as the target year approaches, following a ‘glide path’. A 2060 fund today might hold 90% equities; by 2060 it’s around 50% equities and 50% bonds. Vanguard, Fidelity, and Schwab offer index-based TDFs with expense ratios of 0.08% to 0.15%. Many actively managed TDFs in 401(k) plans charge 0.50% to 0.90%, watch that fee carefully.
You put your entire $50,000 401(k) into a Vanguard 2055 target-date fund (VFFVX, ~0.08% expense ratio) at age 30. The fund holds ~90% stocks today, automatically rebalances back to that allocation, and shifts to a bond-heavier mix as you approach 2055. Over 35 years at ~9% blended returns, the $50,000 plus ongoing $23,000/year contributions grows past $5M with zero manual decisions.
Owning a target-date fund alongside a bunch of individual stock picks in the same account. The TDF is designed to be the entire portfolio. Layer single stocks on top and you’ve broken the glide path and the diversification all at once.
A 60-second lesson on this, with a worked drill, lives inside the Finlo app. Free, forever, on the basics.