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. Asset Allocation Fund

    A mutual fund that provides investors with a portfolio of a fixed ...
  2. Target-Date Fund

    A mutual fund in the hybrid category that automatically resets ...
  3. Index Fund

    An index fund is a type of mutual fund with a portfolio constructed ...
  4. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  5. Investment Fund

    A supply of capital belonging to numerous investors that is used ...
  6. Asset Allocation

    An investment strategy that aims to balance risk and reward by ...
Related Articles
  1. Investing

    Life-Cycle Funds: Can It Get Any Simpler?

    Discover a security that offers a way for you to put your retirement portfolio on autopilot.
  2. Retirement

    Target Your Retirement With Life-Cycle ETFs

    These target-date funds provide asset allocation and rebalancing at a low cost.
  3. Investing

    The Pros And Cons Of Target-Date Funds

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

    Using Age-Based Funds In Your 401(k)

    If you prefer a "hands-off" approach to saving for retirement, target-date funds may be for you.
  5. Retirement

    Should Mutual Funds Still Be in Your Retirement Plan?

    Mutual funds are still widely used in retirement plans, but they may be losing their appeal. Find out if retirement mutual funds should be in your portfolio.
  6. Financial Advisor

    Advising FAs: Explaining Mutual Funds to a Client

    More than 80 million people, or half of the households in America, invest in mutual funds. No matter what type of investor you are, there is bound to be a mutual fund that fits your style.
  7. Financial Advisor

    5 Characteristics of Strong Mutual Fund Shares

    Discover some of the basic characteristics shared by good mutual funds that investors can use to help them in selecting funds.
  8. Retirement

    Pick A Retirement Date: Target-Date Funds Will Do The Rest

    If stock picking makes your palms sweat and asset-allocation strategies make your head spin, these mutual funds can help.
RELATED FAQS
  1. How do I judge a mutual fund's performance?

    Evaluate mutual fund performance utilizing resources such as Morningstar; compare the fund with others in its peer group ... Read Answer >>
  2. Why is it that when investors realize returns on a mutual fund, its price tends to ...

    Mutual funds have been in existence since 1924, when the first open-ended mutual fund was created. Since then, the market ... Read Answer >>
Hot Definitions
  1. Return on Market Value of Equity - ROME

    Return on market value of equity (ROME) is a comparative measure typically used by analysts to identify companies that generate ...
  2. Majority Shareholder

    A person or entity that owns more than 50% of a company's outstanding shares. The majority shareholder is often the founder ...
  3. Competitive Advantage

    An advantage that a firm has over its competitors, allowing it to generate greater sales or margins and/or retain more customers ...
  4. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities ...
  5. Wash-Sale Rule

    An Internal Revenue Service (IRS) rule that prohibits a taxpayer from claiming a loss on the sale or trade of a security ...
  6. Porter Diamond

    A model that attempts to explain the competitive advantage some nations or groups have due to certain factors available to ...
Trading Center