Would you like to find a mutual fund that takes all the work out of deciding how to manage your money? Mutual funds are sold by Prospectus only, please carefully consider investment objectives, risks, charges, & expenses before investing. For this and other information please call the fund provider or my office to request a prospectus. Please read it carefully before you invest. Where the fund’s managers could routinely adjust the portfolio for you, under the principle that older individuals must have more conservative portfolios. Well, such funds do exist and are intended to be a simple solution to a complex problem for investors as they age.
A lifecycle fund is designed as a one-stop shop for your investment needs. You decide when you want to retire, for instance from 1 year to 25 years, and the fund company pools your money with other investors who have the same goal. And if you are already retired, some firms offer a fund that provides current income. The fund invests your money in other funds within its family and thus becomes a “fund of funds.” It may include a mixture of equity, fixed income, and money market funds and grows more conservative as you age.
But does this approach take your complete financial picture into consideration? Suppose that you have additional investments, such as stocks, bonds, or mutual funds? A lifecycle fund manager is not going to know about these. Consequently a lifecycle fund could end up duplicating other investments that you own and potentially cause you to have a poorly diversified portfolio. Lifecycle funds are designed to be your core investment. Thus you would have to put most of your investment eggs in one basket for the theory to operate. If you don’t, you may defeat the purpose of lifecycle investing. In addition, since it is a fund-of-funds, you may pay a management fee on top of other management fees.
I believe that asset allocation is important and should be reviewed each year but adjusted only if necessary. What would make it necessary? A change in your income needs, health, and family are among some of the reasons to revise your portfolio. On the other hand, a revision by someone whom you have never met and who does not understand your unique needs may be counterproductive to your overall financial wellbeing.
To find out if a lifecycle fund is right for you, check the enclosed coupon. I'll schedule an appointment to look at your complete financial picture.
