What is a target-date fund?

A target-date fund is designed to adjust its asset allocation over time according to a specific target date, typically aligned with an investor's anticipated retirement date. This type of mutual fund starts with a more aggressive investment strategy, often including a higher proportion of stocks when the target date is far off. As the target date approaches, the fund gradually shifts its investments towards more conservative options, such as bonds and cash equivalents. This gradual adjustment aims to reduce risk as the investor nears retirement, providing a balanced approach to savings for that specific future date.

The other options describe distinct types of funds or investment strategies. For instance, a fund that invests only in technology stocks is focused on a specific sector, while a type of exchange-traded fund for short-term trading would not have the balanced, long-term focus that a target-date fund has. Similarly, a fund limited to investing in international markets does not reflect the diversified and adaptive nature characteristic of target-date funds.