How Fidelity Manages Freedom® Funds
If you've decided that a target date fund may be a smart way to save for retirement, there are many reasons to consider a Fidelity Freedom® Fund.
The Freedom Funds follow a "glide path," which is illustrated below. This glide path is based on Fidelity's research and shows the funds' anticipated exposure to equity, bond, and short-term funds over time. Our glide path strategy strives to balance investment returns and risks while seeking to meet retirement income objectives.
Each Freedom Fund name includes a date, which can help investors to choose the fund that represents their anticipated year of retirement, their "target date." For example, the Fidelity Freedom® 2030 Fund is for investors expecting to retire around 2030. Each Freedom Fund's neutral asset allocation strategy becomes increasingly more conservative as the target date approaches and passes.
The Freedom Funds are generally expected to reach their most conservative allocation 10–19 years after the target date. At that point, the target asset allocation will include approximately 24% equity funds, 46% bond funds, and 30% short-term funds.
Note that the above chart is meant to show an approximation of future neutral asset allocation adjustment and is meant for illustration purposes only. All Freedom Funds are subject to the volatility of U.S. and international equity and fixed income markets, and may be subject to risks associated with investing in high-yield, small-cap, and foreign securities. Principal invested is not guaranteed at any time, including on or after a fund’s target date. Actual Freedom Fund future target asset allocations may differ.
Professional portfolio management
Fidelity has been managing the Freedom Funds since 1996 through a range of market cycles. During that time we have developed a strategy that allows investors to potentially benefit from both a disciplined approach to fund management, and the experience and judgment of our fund managers. Although our fund managers take a long-term approach to key asset allocation decisions, they also review each portfolio on a daily basis and can make adjustments as needed.
Each Fidelity Freedom Fund, with the exception of the Freedom Income Fund, is managed to a specific target retirement date. For instance, the Fidelity Freedom 2020 Fund is designed for investors who plan to make contributions until about the year 2020, at which point they expect to retire, stop making contributions, and may start withdrawing money from their account.
The Fidelity Freedom Income Fund is designed for investors in retirement. It seeks to maintain a stable asset allocation that emphasizes bonds and short-term investments, along with some exposure to domestic and international equities.
Dynamic asset allocation
At the outset, when the target date is many years away, each fund's asset allocation tends to be more aggressive, with a larger portion of the holdings in equities. As the target date approaches, that allocation automatically becomes more conservative, with a greater percentage of bonds and short-term investments introduced into the mix. This helps increase the chances that the asset allocation remains aligned with investment needs as investors save for, approach, and draw down savings in retirement. The Freedom Funds' glide path guides each fund’s transformation from a more aggressive approach to a more conservative approach.
Our risk management practices are designed to seek the kinds of investment returns that will help customers reach their retirement income goals. Toward this end, all investment decisions are informed by analytical frameworks and sound portfolio manager judgment. We focus on minimizing downside risk while seeking to reduce the chances that customers will not meet their retirement income needs.
Diversified allocation to various asset classes
Fidelity Freedom Funds allow you to create a diversified portfolio without having to choose several funds on your own. Each Freedom Fund has a target asset allocation composed entirely of Fidelity funds across a broad range of asset classes. These underlying funds go through a rigorous selection and ongoing evaluation process that includes an analysis of each fund’s performance, risk, style consistency, and how it works with the other funds in the portfolio.
The table below contains a list of all the underlying funds grouped by category. The funds marked with an asterisk (*) are called Series Funds,* which are mutual funds that are managed exclusively for Fidelity's asset allocation products. We believe the utilization of the Series Funds structure allows the Freedom Fund portfolio managers to more effectively manage the allocation of asset classes and more closely align the risk and return characteristics of the underlying funds with the overall objectives of the various Freedom Funds.
Diversification and asset allocation do not ensure a profit or protect against loss.
|Domestic Equity Funds||International Equity Funds||Bond Funds||Short-Term Funds & Net Other Assets|
Investment Grade Debt Funds
Inflation-Protected Debt Funds
High Yield Bond Funds
Floating Rate Debt Funds
Emerging Market Debt Funds
Real Estate Debt Funds