Target Date PortfoliosRanked by Performance

Target-date portfolios automatically shift from a growth-oriented allocation to a more conservative one as the investor approaches a specific year -- their retirement date. Early on, they hold mostly equities; over time, the "glide path" gradually increases bond exposure as the target date approaches. Target-date funds are widely used in workplace retirement plans because they automate the process of lifecycle asset allocation without requiring any active decision-making from the investor.

Their main limitation is that the glide path is set at the fund level, not tailored to individual circumstances -- two investors with the same target date but very different risk tolerances or spending needs will hold the same portfolio. The performance of target-date portfolios also depends heavily on the interest rate environment in the years surrounding the target date, since the shift to bonds increases sensitivity to rate changes at exactly the point when the portfolio is largest.