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What is an asset allocation fund?

An asset allocation fund is a type of mutual fund or ETF (exchange-traded fund) that invests in a mix of different asset classes, such as stocks, bonds, and cash.

What are asset classes?

An asset class is a group of investments such as stocks, bonds, and short-term or "cash" investments. Investing in different asset classes is a way to diversify your portfolio, which can reduce your risk of losses. Here are the most common asset classes: Stocks. When you purchase a stock, you’re buying a small piece of a company.

What are the different types of asset allocation funds?

Here are some common types of asset allocation funds: Target-date funds. These funds are designed to help investors save for retirement. They automatically adjust their asset allocation over time, becoming more conservative as the fund’s target date approaches. Balanced funds.

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