In what way does a target-date fund adjust its investment strategy?

A target-date fund is designed to adjust its investment strategy over time in alignment with a specific retirement date or target date. As the target date approaches, the fund gradually changes its asset allocation, typically shifting from a higher concentration of risky assets such as stocks to a more conservative mix that includes bonds and cash equivalents. This gradual transition helps to reduce the investment risk as investors near retirement, aiming to preserve capital and ensure that funds are available when needed for retirement expenses.

The other options do not accurately represent the nature of target-date funds. Focusing primarily on high-risk assets does not align with the gradual risk-reduction strategy employed by these funds. Also, target-date funds are specifically designed to change their investment strategy as they approach the target date, contradicting the idea that they do not change once set. Lastly, the concept of doubling the investment every five years does not reflect any standard practice related to target-date funds. Their adjustments are based on a systematic strategy rather than arbitrary doubling of investments.