How a target date fund works. A target date fund is a mix of stocks, bonds, and other investments. The great thing about a target date fund is that it adapts over time so that the mix of investments is appropriate for your age. This helps make sure you have a diversified portfolio and that, as you age, your portfolio adjusts automatically.
Age plays a part in how we invest. The general rule of thumb is that when you are young, you can take more investment risks, and as you get older, you move to more conservative investments. A target date fund makes these adjustments to a more conservative approach as you get closer to your target date for retirement.
When selecting a target date fund, make sure you know find out how much the fees are that you are being charged by the asset manager offering the fund.
The average fee for a target date fund is 0.55% annually.
By comparison, the target date fund offered in the Icon plan is 0.13%.