Which type of investment fund is characterized by a specific risk profile?

A target-risk fund is designed specifically to meet the risk profile of investors based on their investment objectives, such as growth, income, or capital preservation. These funds are actively managed to maintain a pre-determined level of risk, aligning the asset allocation of the fund with the target risk level—such as conservative, moderate, or aggressive. This helps investors who have a clear understanding of their risk tolerance choose a fund that suits their investment needs throughout different market conditions.

In contrast, growth funds primarily focus on capital appreciation and do not cater to a specific risk profile; they naturally involve higher risk due to the emphasis on high-growth companies. Balanced funds mix both equity and fixed-income investments but do so with a broader aim of diversifying risk rather than adhering to a specific risk profile. Index funds aim to replicate the performance of a specific index and do not adjust for individual risk tolerance, as their focus is on tracking market performance rather than individual risk management.