Easy Does It
Want some simple mutual-fund retirement choices? Consider life cycle funds. These funds have been attracting assets like crazy for two reasons: They're easy to understand and they're one-stop-shopping investment vehicles.
"Choosing a life cycle fund is simple," says Tom Roseen, senior research analyst at Lipper. "Your initial choice typically depends on your risk tolerance."
Roseen says these funds appeal to busy professionals and entrepreneurs who don't want to take the time to pick a package of retirement-specific funds. "Life cycle funds offer simple 401(k) and retirement solutions that provide professional diversification but also regularly rebalance the allocations and work for those looking for a turnkey kind of investment," Roseen says.
Look for a wide range of life cycle funds available from fund families such as Fidelity, T. Rowe Price and Vanguard. While these types of funds can fit nicely into a qualified retirement plan, they're not for everyone. Forget about them if you're tax-conscious, if you're seeking home run-type returns (most represent a blend of stocks and bonds), or if keeping investment expenses down is a big deal for you (many are funds of funds and have higher annual expenses than other types of funds). That said, they do make retirement investing easy.
Dian Vujovich is an author, syndicated columnist and publisher of fund investing site fundfreebies.com.