Target Retirement Funds: All In One Investing

If you want to invest in the stock market but feel that you don't have the time and patience to search out specific mutual funds or stocks to invest in, consider target retirement funds. Target retirement mutual funds are getting more and more popular, offering instant diversification into stocks and bonds, as well as automatically shift to a more conservative blend as you near your target retirement date. The great thing about these funds is that it can essentially be left on "autopilot" until retirement.

First, you choose the target date that you would like to retire, then pick the corresponding mutual fund. In our case, we picked the Vanguard Target Retirement 2045 fund (VTIVX). Of course, 2045 is 38 years from now, and we will be both 68 years old then. But the reason we picked that particular year is because we are comfortable with the higher stock allocation of the fund for greater gains (and greater risk).

VTIVX is 71 percent invested in domestic stocks, 19 percent in international stocks, and 10 percent in bonds (all through index funds). It's expense ratio is a paltry 0.20 percent, lowest among its peers, and its inception to date return (2003) is a very decent 14.14 percent. This is a great investment vehicle for a Roth IRA, for example.