Target-Risk Fund
AdvancedA target-risk fund is a diversified investment fund that keeps a fixed level of risk, such as conservative, moderate or aggressive, by maintaining a set mix of assets over time.
Target-risk funds, also called risk-based or lifestyle funds, offer a ready-made portfolio matched to a particular risk tolerance. A conservative fund might hold mostly bonds and cash, a moderate fund a balanced mix, and an aggressive fund mostly shares.
For example, a moderate target-risk fund might aim to keep about 60% in shares and 40% in bonds, rebalancing regularly to stay close to that mix as markets move.
Target-risk funds differ from target-date funds. A target-date fund automatically becomes more conservative as a chosen date, such as retirement, approaches. A target-risk fund keeps the same risk level unless the investor switches funds.
These funds are simple, diversified and professionally managed, making them suitable for investors who want a single fund. The investor must choose the right risk level and review it as their circumstances change. Risk labels are not standardised, so funds described as moderate by different providers can hold quite different mixes.
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