A due date fund is a class of mutual funds or ETFs that periodically rebalance asset class weights to optimize risk and return over a predetermined period of time.
The asset allocation of a due date fund is generally designed to gradually transition to a more conservative profile to minimize risk as the due date approaches.
The appeal of due date funds is that they offer investors the opportunity to put their investment activity on autopilot in one vehicle.
Due date funds are typically repaid at intervals of 5 years, such as in 2035, 2040 and 2045.
Although they are relatively more expensive than other types of mutual funds, expense ratios for due date funds have declined significantly in recent years.