Target date funds: saving for university fees or a wedding

You can put your money in a cash savings account and hope the 2%-5% a year return you may get will be enough to generate the funds you need.

Or you could try and invest your money in the stock market, using a traditional independent financial adviser to help you find the right balance of risk and opportunity that could see you generate a greater return each year - or doing it yourself.

As you get closer to your goal, you'll have to remind your adviser that you need to shift your money out of riskier stocks and into something lower-risk, lest you see your gains wiped out just at the moment you need the cash to put your child through university.

But with a target date fund, you can choose when you want your end date to be, and the fund will automatically shift your money into lower-risk assets the closer you get to that goal. This makes them ideal for goals-based investing, such as saving for university fees or funding a wedding.

These funds automate the process at the heart of most longer-term investing strategies: when your further away form your goal, they invest in assets such as equities with a higher risk and return potential so as to maximise capital growth; as you move closer to your goal, they gradually move your money into less risky assets, such as bonds and property, to ensure your capital is at increasingly less risk of a collapse, from which there will be no time to recover.

Different target date funds mature on different target dates in the future - so if you're hoping to retire in, say, 2030, you would pick a 2030 target date fund; if your aim is to retire 10 years after that, you would go for the 2040 target date fund option.

Tread carefully

However, Alistair Cunningham, financial planning director at Wingate Financial Planning, says investors still need to tread carefully. "Target date funds fail to recognise a basic financial planning consideration: people's objectives change," he says.

But target date funds are more flexible than many believe. While you will be working towards your goal, some vehicles will let you take money out at any time or switch to a new target date fund should your priorities change - just check whether there are any fees for doing so.