What is the purpose of Target Date Funds?

Target Date Funds are designed primarily to balance risk and growth potential as they approach a specific retirement date, making the purpose of these funds clearly aligned with option B. These funds are structured to gradually become more conservative in their asset allocation as the target date approaches, which is usually set around the year in which an investor expects to retire.

Initially, the fund may have a greater allocation to equities to capitalize on growth potential, but over time, it reallocates to bonds and other fixed income securities to mitigate risk as the investor nears the time when they will start to withdraw funds. This dynamic allocation strategy aims to provide investors with a well-managed solution that aligns with their timeline and risk tolerance.

By considering the investor's life stage and retirement schedule, Target Date Funds offer a tailored approach to investing that differentiates them from other fund types which might not take the retirement timeline into account.