Understanding TDF Glide Paths
Glide paths aren’t just a change in equity and fixed income allocations, there are changes to investment types, too.
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Art by Chiara Brazzale
A target-date fund (TDF)’s glide path represents its changing mix of investments over time, Capital Group explains on its website. As a participant’s target retirement date nears, the fund “glides down” to a more conservative mix of investments.
Understanding how a TDF’s glide path works—how equities and fixed-income-type investments shift as investors age—is necessary for defined contribution (DC) plan sponsors to fulfill their fiduciary duties in fund selection and monitoring plan investments.