Life Cycle Funds: A "Stage in Life" Investment Alternative

Abstract

Investors in today's market have a relatively new mutual fund investment alternative to consider: Life Cycle Funds. The primary appeal of this type of investment is its "set it and forget it" approach to investing. Investors and employees with little time to oversee and manage their investment portfolios are drawn to this category of fund.

Demand for this relatively new type of fund, first introduced in the 1990s, is reflected in their rapid growth. Life-cycle fund assets grew 60% in 2005 from the prior year to $70.1 billion (Laise, 2006). The number of offerings has increased significantly, so much so that Morningstar recently introduced three new categories of life-cycle funds. (Morningstar, 2005)

This research focuses on the relatively new life cycle funds and answers questions regarding their availability, expenses, turnover, risk and return. A comparison of these variables is made with the total universe of mutual funds. Investors are provided information to utilize in making a more informed investment decision.