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Are Target Retirement Funds index funds? |
please don't get mad at this question :) A target retirement fund is not an index fund. Rather it is a fund that consists of a collection of other funds in the family that changes as you become older. A TSM is a type of index fund. There is something that you need to be aware of with a TSM fund. It is capitalization weighted. That means that the the top 10 holdings in the fund make up a very large portion of the total assets of the fund. One of the precepts of investing is diversification. Most index funds do not follow that rule too well, this one included. The Target Retirement Fund is not an index Fund - it is one fund that invests in several index funds. Since all of the funds it invests within are indexed, you are getting a similar approach to index investing. "I was told the index fund is the way to go for me..." If you don't have any other investments (bonds, international stocks, etc), it may NOT be right for you. A better diversified Target Retirement fund which includes international stocks & bonds may be better. |
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