The One-Fund Plan

Retirement Ahead SignIf you’re stymied about where to start investing, consider a basic all-in-one fund called a target date fund that puts your financial plan on cruise control. Well, sort of. Let us explain:

First, you pick a fund that’s targeted toward your desired retirement date—say, 2030, 2035, 2040, etc.

Your money goes into a pool of investments all held within that target date fund. Based on the deadline (the target retirement date), the fund’s allocation shifts over time to become more conservative as retirement nears.

Take the Vanguard Target Retirement 2030 Fund (VTHRX). Right now it has a mix of 81% stocks and 19% bonds. That’s pretty aggressive.

But by 2030, the allocation will be 50% stocks and 50% bonds. The asset allocation will then continue to shift until becoming fixed at 2037, with a 30% stocks/65% bonds/5% cash mix. Why does a 2030 fund still adjust through 2037? Many funds assume that you will keep your money there, even after you retire.

Keep in mind:

    • Sure, there’s risk involved. But remember, when your investment horizon is decades away, not saving—or being too conservative—is also risky.


    • Investment style, fees, and fund options vary. So comparison shop, and know what you’re buying. Ideally, the expense ratio for a target date fund should be under 0.70%.


  • Could you do better? Yep, a portfolio tailored to your own needs and market outlook would be better. But, hey, this is easy, and it’s likely much better than doing nothing at all.