What does the existence of two fund types imply about asset allocation options?

• A. You can choose either individual funds or lifecycle funds
• B. There are no bonds
• C. You must invest in all funds
• D. You cannot diversify

Answer: (A)

Having two fund types shows you have flexible ways to set up your asset allocation. If you pick individual funds, you decide the exact mix of assets—how much to put in stocks, bonds, and other investments—so you tailor the risk and return to your own preferences. If you choose lifecycle (target-date) funds, the fund automatically adjusts the mix over time, becoming more conservative as you approach a target date. This means asset allocation can be self-directed or automated, giving you practical options depending on how hands-on you want to be. It doesn’t imply there are no bonds, nor that you must invest in every fund, nor that you can’t diversify; both types typically include a diversified range of assets, and you can diversify within whichever option you choose.