What is referred to as the glide path of a target date fund?

The glide path of a target date fund refers specifically to the path of asset allocation that becomes more conservative as the target date approaches. Target date funds are designed to automatically adjust their investment mix over time, typically becoming progressively more conservative to reduce risk as the target date (often retirement) nears. This gradual shift in allocation aims to protect the investor’s capital by reducing exposure to more volatile assets, such as stocks, and increasing allocations toward more stable investments, like bonds or cash equivalents.

By following this glide path strategy, target date funds facilitate a smoother transition for investors as they approach significant life events, particularly retirement, where preserving investment capital becomes crucial. This automatic rebalancing process helps align the investment strategy with the investor's time horizon and risk tolerance. The other choices do not capture the essence of what a glide path involves in the context of target date funds.