What happens if I'm not sure what investment option to choose?
The platform recommends an investment fund based on your age and desired retirement date. As you approach your retirement date, the fund automatically becomes more conservative, adjusting the asset mix to reduce risk.
BlackRock, the world's largest asset manager, offers a default target date fund designed to balance investment returns and risk. However, you have the option to choose a different fund if you prefer.
BlackRock's target date funds are designed to help investors plan for retirement or other long-term financial goals by automatically adjusting their asset allocation over time. Here are some of the key advantages:
- Automatic Rebalancing: Target date funds automatically adjust the mix of investments as the target date approaches. This means the fund gradually shifts from higher-risk investments, like stocks, to lower-risk investments, like bonds, as the target date nears. This helps manage risk and align the investment strategy with your time horizon.
- Simplicity and Convenience: Investors don’t need to constantly monitor and rebalance their portfolio. The fund’s automatic adjustments reduce the need for hands-on management and simplify the investment process.
- Diversification: BlackRock’s target date funds typically offer a diversified portfolio that includes a mix of asset classes, such as equities, bonds, and sometimes alternative investments. This diversification helps spread risk and can enhance returns over time.
- Professional Management: The funds are managed by investment professionals who handle the allocation and rebalancing decisions. This professional oversight can be particularly valuable for those who lack the time or expertise to manage their investments effectively.
- Customized Risk Tolerance: Each fund is designed with a specific retirement date in mind, so the risk profile of the fund adjusts as the target date approaches. This means investors’ portfolios become more conservative over time, reducing the risk of significant losses as they get closer to their retirement date.
- Cost Efficiency: Target date funds often have relatively low fees compared to hiring a financial advisor to manage a similar strategy.
- Long-Term Focus: These funds are structured to keep investors focused on their long-term goals rather than short-term market fluctuations. This can encourage better investment discipline and reduce the temptation to make emotional investment decisions.
Overall, BlackRock’s target date funds aim to provide a comprehensive, hands-off investment solution that adjusts to meet investors’ evolving needs as they approach their financial goals.