The Lowdown On Target Funds

[jeffrey]

Although Target Funds are a relative newcomers to the investing scene, target funds have been catching on big-time, with assets nearly tripling to $33 billion over the past 2 1/2 years...

...First, you pick a fund with a date that roughly corresponds to the year you plan to retire. The funds are usually available in five- or 10-year increments from 2005 to 2050.

The fund then invests your retirement stash in a diversified blend of stocks, bonds and cash that has a risk/return profile appropriate for someone your age -- heavier in stocks if you're young, heavier in bonds and cash if you're older.

But here's the really neat part: Whatever asset mix the fund starts out with, it automatically shifts money from stocks into bonds and cash over time, so that the portfolio becomes more conservative and less volatile as you move toward retirement.

By the time you retire, the fund is mostly invested in bonds and cash with a modest stock position to provide some long-term growth (see the chart). All this takes place behind the scenes, however; all you have to do is sit back and enjoy the ride... [read more at money.cnn.com]