![]() ![]() What Are the Advantages and Risks of Investing in Allocation Funds? There are also several categories with target dates that are in the past (for investors who are already retired) or for funds that are geared toward retirees in general (without a specific target date). Morningstar currently has several target-date fund categories, with future target dates ranging from 2025 to 2065. These funds automatically adjust their asset mix to become more conservative as the target date approaches, following a preset glide path. Second, target-date funds provide diversified exposure to stocks, bonds, and cash for investors saving up for retirement on a specific target date. In practice, these classifications mainly reflect the level of underlying equity exposure, which ranges from about 12%, on average, for conservative-allocation funds to 90% for aggressive-allocation funds. Morningstar classifies these funds into six main categories, ranging from conservative to aggressive. First, some allocation funds aim for a risk level that remains relatively static. Portfolio Basics: How to Build an Investment Portfolio What Are Allocation Funds?Īllocation funds invest in more than one asset class. I’ll start with some of the most widely used types of investments and walk through what you need to know to use them effectively in a portfolio. In this series on portfolio basics, I’ll explain some of the fundamentals of putting together sound portfolios. And even if you already have an established portfolio, an allocation fund could be a logical addition thanks to this fund type’s built-in diversification and simplicity. Should you have an allocation fund in your portfolio? These funds-which combine major asset classes like stocks, bonds, and cash in a single package-can be a great way to start investing. ![]()
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