Many retirement investors have turned to target-date retirement funds to make investing easier. But before you rely on these funds, there are some things you need to know about them and whether target-date funds make sense for you.
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at target-date retirement funds and presents three questions you should ask in assessing them. First, Dan urges you to find out how asset allocations change over the course of your lifetime. He also urges you to assess how risky the fund will be at various points. Second, take a look at the costs of your fund, with an eye toward finding out whether you pay an additional fee for management beyond what underlying fund investments charge. Finally, Dan recommends learning whether the target-date fund is actively managed, as tactical bets add another element to return and risk. Dan concludes that while target-date funds can be smart investments, you need to know the specifics of each fund available.
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