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. Index Fund

    An index fund is a type of mutual fund with a portfolio constructed ...
  3. Investment Fund

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

    An investment strategy that aims to balance risk and reward by ...
  5. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  6. Family Of Funds

    A group of mutual funds offered by one investment or fund company. ...
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. Investing

    The Pros And Cons Of Target-Date Funds

    These accounts will take charge of your retirement savings, but should you let them?
  3. 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.
  4. 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.
  5. Managing Wealth

    Should Balanced Funds Be Part Of Your Portfolio?

    Find out why you should include balanced funds in your portfolio, including the importance of customizability, diversification and professional management.
  6. Investing

    What You Need to Know About Mutual Funds

    Mutual funds are a good investment opportunity, but investors should know how they operate.
  7. Investing

    7 Tips Before Picking Mutual Funds for College Savings Plan

    Discover what factors should be considered to make the best choices for a 529 portfolio, and learn about how risk and age factors can affect those choices.
RELATED FAQS
  1. How often should I rebalance my retirement account?

    Learn how to rebalance your retirement portfolio as you age, and how to redistribute profits from outperforming funds to ... Read Answer >>
Hot Definitions
  1. Portable Alpha

    A strategy in which portfolio managers separate alpha from beta by investing in securities that differ from the market index ...
  2. Run Rate

    1. How the financial performance of a company would look if you were to extrapolate current results out over a certain period ...
  3. Hard Fork

    A hard fork (or sometimes hardfork) is a radical change to the protocol that makes previously invalid blocks/transactions ...
  4. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  5. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  6. Zero Day Attack

    Zero Day Attack is an attack that exploits a potentially serious software security weakness that the vendor or developer ...
Trading Center