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1.
Two life-cycle funds with the same target date will likely earn different returns.
True. Two life-cycle funds will likely earn different returns because they hold different portfolios inside them.
2.
Which is a disadvantage of life-cycle funds?
Many of the individual funds that comprise a life-cycle fund are likely to contain holdings in a number of the same companies. Therefore, the diversification you might be aiming for is not really there.
3.
Which is an advantage of life-cycle funds?
They eliminate the need to adjust the asset allocation within your portfolio on your own as you progress toward retirement. They automatically become more appropriately conservative as the years go by as you approach and enter retirement.
4.
The huge number of stocks held in the mutual funds held by a life-cycle funds spreads the associated expenses and thereby reduces the overall cost.
False. There are a large number of funds involved in the "fund of funds" approach. Each of those underlying funds has an expense ratio, which tends to increase the overall cost of managing them.
5.
A life-cycle fund is ___________.
A fund "basket" composed of other mutual funds. The mix of funds is designed to be suited to the retirement target date you have chosen.