Funds Beginner: Life-Cycle Funds

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1.
Two life-cycle funds with the same target date will likely earn different returns.
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True. Two life-cycle funds will likely earn different returns because they hold different portfolios inside them.
2.
Life-cycle funds eliminate _______.
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The need to adjust asset allocation on your own. These funds take care of that on their own.
3.
Life-cycle funds eliminate risk by investing in a broad universe of diversified mutual funds.
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False. Nothing can eliminate investment risk. Life-cycle funds aim to minimize it.
4.
A life-cycle fund is ___________.
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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.
5.
What is the underlying rationale of the life-cycle fund approach?
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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.