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1.
Once you have chosen a life-cycle fund for your retirement, _______.
You can switch to a different life-cycle fund if it meets your needs better. You can roll your fund over to a different one.
2.
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.
3.
What is the underlying rationale of the life-cycle fund approach?
The greater the number of years you have until retirement, the more willing and able you are to tolerate risk. For a given risk level and time horizon, there is an optimal mix of stock, bond and cash-equivalent funds that provides the highest expected return.
4.
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.
5.
Life-cycle funds eliminate _______.
The need to adjust asset allocation on your own. These funds take care of that on their own.