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Definition: Zacks Life Cycle Index
Zach Investment research have come up with a series of indices for the benchmarking of target date fund. Each of these indices are specific for a sort of fund. These majorly constitute of US equities, international equities as well as domestic bonds in the market. Life cycle funds or target date funds are a variety of mutual funds. In these mutual funds the proportion of the asset value in the fund gets automatically adjusted during the life time of the fund. The adjustment is much riskier during the initial years but as the fund nears its maturity, the risk goes down.
The major advantage of such life cycle mutual funds is that the whole portfolio of the investor can be put in sort of automated manner but just one fund, which is managed for them. Such kind of funds is ideally suited for investor who have other priorities and are not actively going to take interest in managing their portfolio. Detractors on the other pole opine that such controlling of other portfolio using one fund is not very wise move as it depends only on the performance of one fund.
Target date funds are very similar to lifecycle funds in their feature of automatically adjusting the asset ratio in the mix of bonds, stocks, cash in a selected time duration set by investor. Where they differ is the structured way of setting their future dates. Generally they do not have fixed returns and are subjected to the way market performs.