With target-date funds, you should put all your eggs in one basket


A relatively new invention in the mutual fund universe is the target-date fund. These are funds intended to be "all-in-one" options that allocate assets based on the year you plan to retire. For example, if you intend to retire in 2040, you'd simply put assets into a 2040 target-date fund. The closer a fund gets to its target date, the more conservative its asset allocation becomes.

Recent legislation and regulatory inducements set up to sign people up automatically for 401(k)s also included inducements to include target-date funds as the primary choice for the automatic investments. Right now, only about 7% of 401(k)s are invested in target-date funds, but the Employee Benefit Research Institute found a disturbing trend in how these funds are being used.