Which type of mutual fund is designed to maintain an appropriate allocation of stocks and bonds for your age?

The targeted retirement date fund is specifically designed to adjust its asset allocation over time in relation to the investor's age and the targeted retirement date. These funds typically start with a more aggressive allocation, which includes a higher percentage of stocks meant for growth, and gradually shift toward a more conservative allocation with a higher proportion of bonds as the target date approaches. This strategic shift helps to reduce risk as the investor nears retirement, aligning with the general principle of reducing exposure to volatile assets as one gets older.

In contrast, index funds track a specific market index without actively managing the allocation based on the investor's age or timeline. Growth funds focus on investments in companies expected to grow at an above-average rate, without a built-in age-related strategy. Value funds invest in undervalued companies, focusing on potential appreciation, but again do not consider the investor's age in their strategy. Hence, the targeted retirement date fund is the most appropriate choice for maintaining an age-appropriate allocation of stocks and bonds.