TDFs

TDFs, or Target Date Funds, are a type of mutual fund or retirement plan designed to simplify investment decisions for individuals planning for retirement. The core concept of a TDF is its glide path, which is a pre-determined investment strategy that automatically adjusts the asset allocation over time. Typically, these funds start with a more aggressive allocation, including a higher percentage of stocks, when the investor is younger and has a longer time horizon until retirement. As the target retirement date approaches, the fund gradually shifts its holdings towards more conservative assets, such as bonds and cash equivalents, to reduce risk.

The "target date" in a TDF refers to the approximate year in which an investor plans to retire. For example, a "2050 TDF" would be designed for someone anticipating retirement around the year 2050. Investors choose a TDF based on their expected retirement year, and the fund management company handles the ongoing adjustments to the investment mix. This "set it and forget it" approach appeals to investors who may lack the time, knowledge, or inclination to manage their own portfolio or rebalance it periodically.

TDFs are often found in employer-sponsored retirement plans, like 401(k)s, and are also available through individual retirement accounts. While they offer convenience and diversification, it's important for investors to understand that the specific asset allocation and glide path can vary significantly between different TDF providers. Performance is tied to market movements, and the risk level changes as the fund matures.