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All-in-One Funds: More Than Meets the Eye

All-in-one funds offer a professionally managed mix of assets intended to meet broad investment goals. These hybrid funds are often found in employer-sponsored retirement plans — you may own one without even realizing it. They can also be appropriate for investors outside the workplace.

Theoretically, an all-in-one fund could be an investor’s only holding, but it may be used with other investments. In either case, it’s important to understand the details beyond these apparently simple investment structures.

Targeting Time vs. Risk
The two most common types of all-in-one funds are target-date funds and lifestyle funds. Although they both follow basic principles of asset allocation, they take very different approaches. Asset allocation is a widely accepted method to help manage investment risk; it does not guarantee a profit or protect against investment loss.

Target-date funds offer a mix of assets -— typically a combination of other funds comprising stocks, bonds, and cash alternatives — selected for a specific time horizon. The target date, which is usually included in the fund’s name, is the approximate date when an investor would withdraw money for retirement or another purpose, such as paying for college. An investor expecting to retire in 2040, for example, might choose a 2040 fund. As the target date approaches, the fund typically shifts toward a more conservative asset allocation to help conserve the value it may have accumulated and potentially provide retirement income.

This transition is driven by a formula called the glide path, which determines how the asset mix will change over time. The glide path may end at the target date or continue to shift assets beyond the target date. Because funds with the same target date may vary not only in their glide path but also in the underlying asset allocation, investment holdings, turnover rate, fees, and fund performance, it’s important to understand the asset mix of a specific fund and how it changes over time. The principal value of a target-date fund is not guaranteed before, on, or after the target date, and there is no guarantee that an investor will be prepared for retirement on the target date.
 
Lifestyle funds are designed to maintain a consistent level of risk. Investors typically have a choice of conservative, moderate, or aggressive lifestyle funds that will match their risk management strategy. Unlike a target-date fund, where the risk level becomes more conservative over time, a lifestyle fund attempts to maintain a consistent risk profile. For this reason, if a lifestyle fund is a core holding, investors might want to shift assets from an aggressive fund to a more conservative one as they approach and/or enter retirement.

The return and principal value of mutual funds fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost. There is no guarantee that an all-in-one fund will meet its objectives. Investing in other securities outside of an all-in-one fund may change an investor’s overall asset allocation.
 
Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest
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This information is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2017 Broadridge Investor Communication Solutions, Inc.

*Securities offered through American Portfolios Financial Services, Inc. (APFS), Member FINRA/SIPC.

APFS is not affiliated with Innovative Insurance Solutions, Ltd.