Lifecycle Funds: Let Them "Do Their Thing"

Lifecycle Funds: Let Them "Do Their Thing"

July 31, 2018
nullBy Michelle Holmes, CFA
Trust Investment Officer

Here's a dilemma: You want to manage your own investments but also recognize the benefits of investing in a lifecycle fund. Doing both could be a problem -- but maybe there's a way to have your cake and eat it, too.

What are Lifecycle Funds?

Lifecycle funds provide a diversified portfolio of mutual funds based on your target retirement date, which is the approximate date when you plan to start withdrawing money from the fund. As the target date draws closer, the mix of stocks and bonds is automatically adjusted.

Although the principal value cannot be guaranteed at any time, including the target date, and may decline at any time, lifecycle funds eliminate the need to make asset allocation or investment decisions. Therefore, they may be an option for investors who don't have the time or desire to monitor their investments. And they're designed to be the only investment in your retirement portfolio.

Instead of letting lifecycle funds do their thing, however, some investors add a bond fund here, a stock fund there -- and, before long, the lifecycle fund benefits are history. When other funds are added, a portfolio may become too conservative or too aggressive for the investor or the investing timeframe.

A Helpful Lifecycle Fund Strategy

If you're an investor with multiple goals and different time frames, you may want to invest in two lifecycle funds -- one with a target date a few years away and another with a target date close to retirement. 

Or, If you really want to monitor some investments, you could invest the bulk of your savings in a lifecycle fund but keep a small allotment in a stock or bond fund — possibly in an industry or sector that you know well.

Everyone's situation is unique, so be sure to contact an advisor before taking any action on your portfolio.

About the Author

Michelle Holmes, CFA

Michelle Holmes is an Assistant Vice President in Investments with Security National Bank's Wealth Management Division. A Chartered Financial Analyst® charterholder, Michelle has two decades of investment experience. She graduated from Morningside College with a Bachelor of Science in accounting, business administration and economics.