If you think choosing the right investments is complicated, you’re not alone. Investors looking for simplicity and portfolio diversification are driving demand for all-in-one investment options.
According to Strategic Insights, a market research firm serving the mutual fund industry, more than two-thirds of the $150 billion that investors added to mutual funds in 2004 landed in asset allocation products.
So what exactly are these all-in-one investments? In a nutshell, they are broadly diversified, professionally managed funds that can serve as a complete portfolio. They come in primarily two flavors.
* Lifestyle or life-cycle funds focus on a particular level of risk. These can be an appropriate choice for investors who want a diversified core investment solution that offers a specific level of risk and potential reward.
* Age- or target-year-based funds target a specific investment time frame or goal. As each fund’s target year approaches, its exposure to stocks (and corresponding risk) will decrease and its exposure to bonds and money market investments will increase to reduce risk and preserve capital. These funds can be suitable...
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