How Does a Target Date Mutual Fund Work?

With a target date mutual fund, investors simply need to pick a fund with a date at or near the year that they expect to retire. For example, there are funds with dates such as 2020, 2030, 2040, and 2050 in their title.

The fund manager will gradually change the asset allocation of the fund as time goes by so that, eventually, there will be a smaller percentage of the portfolio in stocks and a higher percentage in bonds and …