Target date mutual funds

Target date mutual funds (aka Life cycle, retirement funds) are growing in popularity in company 401Ks and IRAs. They are mutual funds where you pick a date when you want to retire (say 2030) and then you pick a fund with that date. Target date funds model the classic investment mantra of picking more risky stocks over bonds when you are still young and decades away from retirement and then as you approach retirement you limit your risk and have some income generating bonds in your portfolio. The appeal of these funds is that all the rebalancing and asset allocation is done for you automatically and is adjusted as you approach your retirement age. These funds are ideal for passive investors who do not have the time to research funds on a continuous basis nor do they have a professionally managed portfolio. Since a target date fund models diversification, asset allocation and all that good stuff for you, it makes sense to allocate 100% of your money to a target date fund in your portfolio. If you have other funds in your portfolio, your "overall" portfolio mix will be skewed I.e. you might be over/under invested in stocks/bonds.


Most fund families (Fidelity, T.Rowe Price, Vanguard and Oppenheimer) with their respective 2030 funds (FFFEX, TRRCX,VTHRX) offer no-load funds. Look out for expense ratios, fees, Morningstar rating, read about the fund manager and have an idea on the fund's objective.