Reference :- A excellent article on BlackRock.com explaining target date funds ( TDF )
A target date fund is a mix of several different types of stocks, bonds and other investments. Technically, a portfolio manager uses what’s called a “glidepath” to adjust the underlying mix of investments that make up your target date fund.
Think of a glidepath as an investment roadmap. It helps determine what your risk exposure in your target date fund should be over the course of your career.
There’s a reason many retirement plans choose target date funds as their default investment: They make it easy for people looking to save for retirement to potentially maximize their future retirement income.
A traditional target date fund might follow a set asset allocation or it might be designed to outperform a certain benchmark (like the S&P Target Date Indices, for example).
A goals-based target date fund, on the other hand, takes a different approach. As the name suggests, these types of funds aim to achieve specific outcomes. Maybe you want to minimize volatility. Perhaps you want to strive to have consistent income in retirement. With goals-based target date funds, the funds are built differently to help you reach your specific goal. In practice, this means customizing the investment strategy – by managing risk, broadening the scope of investments, etc. – to help increase your chances of reaching your goal.
TDFs helps in Diversifaction and managing inflation