Lifecycle Funds and Your TSP Growth
A lifecycle fund is a diversified mutual fund or exchange-traded fund (ETF) that automatically shifts its investment mix to become more conservative over time. It is also known as a target-date fund.
How Lifecycle Funds Work
- Target Date: You pick a fund with a year in its name that matches your goal or retirement date (like 2050).
- Glide Path: The fund follows a preset schedule—called a glide path—to change its asset mix as the target year approaches.
- High Growth Early On: When you are far from the target date, the fund invests heavily in stocks (equities) for maximum growth, accepting higher short-term risk.
- Lower Risk Later On: As the target year draws near, the fund automatically sells stocks and buys more bonds and fixed-income assets to protect your money from market drops.
- Hands-Off Management: Professional managers handle all rebalancing and adjustments, so you do not have to change your portfolio manually.
