Life-cycle ETFs are a type of investment that are designed to provide an easy way to plan for your retirement. With this type of investment, you can put your retirement savings on autopilot and not worry about them. You can choose a target date for your retirement. For example, you might choose an ETF that has a target date of 40 years. Then you begin to systematically invest in the ETF. At the beginning of the investment period, the ETF will hold a majority of stocks. This provides more opportunities for growth for the investor. As time goes by, the investment mix of the ETF starts to change. It slowly becomes more conservative as it gets closer to the target date. By the time you get close to retirement, the majority of securities in the ETF are bonds and other fixed income securities.


Investing in life-cycle ETFs provides you with some advantages when you are trying to plan for your retirement. First, a professional money manager will be in charge of making the investment decisions for you. You will not have to worry about whether your retirement portfolio is too conservative or too risky. You simply give the money to the ETF and let the manager worry about it. This provides a type of investment that is very passive and does not require much attention on your part. 

Another advantage of life-cycle ETFs is that your retirement dollars will be protected. You do not have to worry about risking too much of your retirement money as you get close to retirement. You need to be able to protect your retirement dollars and this type of investment provides a way to do this.


Even though life-cycle ETFs have some good things about them, there are a few drawbacks associated with them as well. When you invest in a managed fund like this, you will have to pay for management fees. Even though most ETF charge less than mutual funds do, you still have to pay a fee. This can eat into your retirement dollars and cost you quite a bit of money over the long-term.

Another disadvantage of this type of investment is that you will not have any control over where your money goes. For some people, this is a good thing. However, if you are the type of person that likes to have a lot of control over your money and your retirement portfolio, this is not the best vehicle for you. You will essentially be handing your money to someone to manage it for you until you retire. This requires you to have a lot of faith in the ETF that you choose and the manager of the ETF that is making all the decisions on your behalf. 

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