Lifestyle Funds for the Inert

Most people are devotees of some hobby outside of work -- for me, it's movies. For others, it's Oscar Wilde, or numismatics. Maybe ornithology. I don't know of anyone whose non-professional passion is asset allocation. No one I know enjoys a lost weekend watching an asset-allocation marathon. They don't huddle inside a coffee house and discuss efficient frontiers and debate whether we have witnessed the death of the equity-risk premium. It's just not that much fun.

Therein lies the problem: Most people, out of fear, confusion or inertia, manage to avoid asset allocation their entire lives. Studies have shown that the average investor allocates 401(k) assets once -- or defers to whatever classes his or her employer provides as as a default -- and never adjusts or rebalances the portfolio again.

"Most investors don't do anything because they have too many choices, and they don't always understand them," said Richard Thaler, behavioral finance professor at the University of Chicago. ...