3 shortcuts for low maintenance investing

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Investing doesn’t have to be complicated, and the beauty of mutual funds is that they simplify investing.

Below are the pros and cons of target-date funds, index funds and lifestyle funds, popular shortcut plans that let investors earn yields without constantly tweaking their portfolios.

1) Target-date funds

The target-date fund is named by its retirement year, or the year you plan to start withdrawing money from the fund. As the date nears, the fund’s asset allocation shifts to become more conservative, and adjustments happen automatically.

These funds can charge high fees, so try to find a fund with an expense ratio of 1 percent or less. They also tend to be light on international stocks. The typical target-date fund has about 20 percent invested overseas, but aim for 30 percent or even more. There are an increasing amount of good foreign businesses, and you don’t want to limit your portfolio’s growth by not having much exposure to foreign stocks.

2) Lifestyle fund

Also known as asset allocation funds, lifestyle funds offer a conservative, moderate, balanced or aggressive investing approach.

These funds let investors choose funds based on their own risk-and-return preference, and they offer broad diversification in one fund.

Investors must remember to adjust these funds, but they don’t have to tweak them too often. It may be a matter of scaling down aggressive investments every 10 or 15 years.

 3) Index fund

An index fund follows a particular market index, such as Standard & Poor’s 500.

This breed of mutual funds is typically inexpensive because investors aren’t paying for a fund manager.

Without a manger actively moving money into well-performing sectors, though, investors may not be pleased to see index funds passively following the market, both up and down.

Not all index funds are diversified, so make sure your index fund is broad enough, and don’t buy an index fund for a specific industry group.