Target Date Funds Let You Invest and Forget

There are, of course, a few downsides to these funds. Some companies may charge a higher expense ratio based on the idea that there are many mutual funds involved. Read the fine print! In addition, some target date funds may be too aggressively invested in terms of their bond-stock mix. Even in funds where the target date is less than 10 years, you might be taking on too much risk for that time frame. This is especially important to consider right now, when the stock market may not rebound as quickly as we want it to. Your investments should remain more conservative than originally planned. Lastly, target date mutual funds can be a little trickier to analyze given the amount of underlying mutual funds in the target date fund. This is easily solved by looking at the list of underlying mutual funds and agreeing with all the categories.

Target date funds are ideal for people just beginning to save for retirement or those who don't want to think too much about their investments but want the peace of mind of knowing they are on the right track. If you want more information, independent research firm Lipper recently published a detailed study on them. One of the mutual fund families highlighted was the Principal Funds, which offers Principal LifeTime 2030(PMTIX Quote). While you should still do a check-up on your investments annually, you can set them on auto-pilot until your situation and asset size starts to change with a target date mutual fund.