What is a Target Date Fund? (Probably your best friend)
If you are scouring the options in your 401(K) and looking for the best way to invest your hard-earned money, don't over complicate the situation. While you may feel like picking 5 or 10 investment options is the best way to diversify your assets, it might just be creating an opportunity for error. Keep it simple by considering a Target Date Fund. A TDF is typically a mutual fund that is designed to invest assets in an age-appropriate way. TDF’s gradually become more conservative as you get closer to your “target date” (typically retirement for most people). As the name would suggest, TDF's are named by the year in which the investor plans to retire and begin taking distributions. For example, a 2060 TDF will have much more exposure to stocks in the 2030’s and 2040’s, and gradually more bond investments in the 2050’s (note: TDF's have no time horizon; there is no maturity date). The beauty of TDF's is that the work is done for you in terms of reallocating your portfolio as you age. For all their benefits, one critique of TDF’s is that they are a one-size-fits-all solution and are not tailored to any individuals’ specific financial circumstances or needs. Nonetheless, TDF’s offer a compelling, set it and forget it solution that is suitable for most investors. Consult your financial professional for more information.
-Your Friends at Red Oak Financial Group!