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A life cycle fund is a
mutual fund geared toward investors in a certain age group or with a specific time horizon
for investing. Life cycle funds exist for different "stages" or age groups.
Life cycle funds tend to be well-diversified portfolios containing assets from the three
major asset classes (stocks, bonds and cash). Each fund has an investment strategy
appropriate to the age group or stage it represents.
Many people like the life cycle approach to investing because it lets the fund do all of
the asset allocation and diversification work for them. For example, if you are an
investor in your 30s who is saving for retirement, you might choose a life cycle fund that
emphasizes growth. When you move into the next "stage" or age group, you simply
move your money to the appropriate life cycle fund.
You should remember that, as a rule, it is never a good idea to invest in any fund until
you read its prospectus and understand the risks involved. |
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