Life-Cycle Fund

DEFINITION of 'Life-Cycle Fund'

A special category of balanced, or asset-allocation, mutual fund in which the proportional representation of an asset class in a fund's portfolio is automatically adjusted during the course of the fund's time horizon. The automatic portfolio adjustment run from a position of higher risk to one of lower risk as the investor ages and/or nears retirement.

Also referred to as "age-based funds".

BREAKING DOWN 'Life-Cycle Fund'

Proponents of life-cycle funds cite the convenience to investors of putting their investing activities on autopilot through the use of just one fund, which is managed for them. On the other hand, critics of these funds say that their "one size fits all" approach is suspect. For investors who don't want to take responsibility for their retirement investing, a life-cycle fund may be appropriate. However, for those who want to take the time and make the effort to direct the management of their investments, life-cycle funds should be avoided.

RELATED TERMS
  1. Target-Date Fund

    A mutual fund in the hybrid category that automatically resets ...
  2. Expense Ratio

    A measure of what it costs an investment company to operate a ...
  3. Asset Allocation

    An investment strategy that aims to balance risk and reward by ...
  4. Balanced Fund

    A fund that combines a stock component, a bond component and, ...
  5. Lifestyle Fund

    An investment fund featuring an asset mix determined by the level ...
  6. Active Management

    The use of a human element, such as a single manager, co-managers ...
Related Articles
  1. Taxes

    New Retirement Plan Limits for 2016

    Here's what the limits look like for 2016, compared to 2015 (the taxes you'll file in April).
  2. Mutual Funds & ETFs

    The Pros And Cons Of Target-Date Funds

    These accounts will take charge of your retirement savings, but should you let them?
  3. Retirement

    Life-Cycle Funds: Can It Get Any Simpler?

    Discover a security that offers a way for you to put your retirement portfolio on autopilot.
  4. Mutual Funds & ETFs

    Target Your Retirement With Life-Cycle ETFs

    These target-date funds provide asset allocation and rebalancing at a low cost.
  5. Retirement

    Too Many Mutual Funds?

    Is there a magic number you should be aiming for? Find out here.
  6. Savings

    Bear Market Mauls Target-Date Funds

    This "set it and forget it" approach to investing is appealing, but it's not the best protection against a bear market.
  7. Products and Investments

    There's a Reason They're Called Junk Bonds

    The closing of Third Avenue Managemet's Focused Credit Fund is a warning to investors and advisors. Beware the junk.
  8. Mutual Funds & ETFs

    Top 3 PIMCO Funds for Retirement Diversification in 2016

    Explore analyses of the top three PIMCO funds for 2016 and learn how these funds can be used to create a diversified retirement portfolio.
  9. Mutual Funds & ETFs

    The 3 Best Downside Protection Equity Mutual Funds

    Learn how it is possible to profit in a bear market by owning the correct selection of mutual funds that provide downside protection and opportunity.
  10. Mutual Funds & ETFs

    The 4 Best Lord Abbett Mutual Funds

    Discover the four best mutual funds administered and managed by Lord, Abbett & Co., LLC that offer investors a wide variety of investment strategies.
RELATED FAQS
  1. Are target-date retirement funds good investments?

    The main benefit of target-date retirement funds is convenience. If you really don't want to bother with your retirement ... Read Full Answer >>
  2. Do mutual funds require a demat account?

    A dematerialized account enables electronic transfer of funds. The account is used so an investor does not need to hold the ... Read Full Answer >>
  3. How liquid are Vanguard mutual funds?

    The Vanguard mutual fund family is one of the largest and most well-recognized fund family in the financial industry. Its ... Read Full Answer >>
  4. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  5. Does OptionsHouse have mutual funds?

    OptionsHouse has access to some mutual funds, but it depends on the fund in which the investor is looking to buy shares. ... Read Full Answer >>
  6. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
Hot Definitions
  1. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  2. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  3. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  4. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  5. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center