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Learning how to invest requires effort and time. Fortunately, mutual funds have simplified investing for a typical investor. Within the past few years the process of selecting mutual funds has been made easier. Target retirement savings are now available through major mutual fund families, and are provided by many 401(k) plans also.

The target retirement fund advantage: one-stop shopping, virtually no investment knowledge or experience necessary. Just buy and hold, pay your fees/expenses as well as maybe sales charges. Professional money managers handle all of the investment decisions based on the retirement year you pick. Just select the target fund closest to the year of your planned, or past, retirement. Example: target retirement 2030 fund will be appropriate in case you plan to retire within two or 36 months of the year 2030.

Once invested you never need to make another investment decision or be worried about how to invest. While you approach retirement and become more conservative, so does your investment portfolio.

Target retirement savings are generally mutual funds that simply invest in other stock funds, bond funds, and money market funds of the same mutual fund company. Target funds dated far in to the future, like target 2040 or 2050, will be heavily invested in stock funds for a long time to come. If you invest in a target 2020 fund today, your hard earned money will be invested primarily in stock funds and bond funds, mostly stock funds the first couple of years.

If you're already retired and don't know-how to invest, you might consider putting your nest egg into the safest of these funds, the retirement income fund. These target funds invest about 80% of your money in safer income-producing investments like bond funds and money market funds to give you income in retirement.

It does not get much easier. Plus, you can save thousands on mutual fund sales charges by purchasing one of these funds by way of a no-load mutual fund family as opposed to through an investment professional.

Target funds are the easy way to invest in a professionally managed retirement portfolio targeted to your station in life. The idea behind these investments: young people need growth and may accept higher risk, middle aged investors will accept moderate risk for higher-than-average returns, and older folks will accept some risk to earn a larger amount of income in retirement.

The problem is: should you not understand investment basics or just how to invest determined by your personal risk tolerance, you might select a target fund that is not really appropriate for you. Quite simply, the exact same shoe will not fit all investors of a given category. Some young people are conservative, and many retired folks are uncomfortable taking even a small risk with their retirement nest egg.

Like with some other mutual fund, you need to understand the nature of the investments held in a target retirement fund portfolio. Virtually any of these funds can lose money, as well as in 2008 the great majority of them did. Why? Since these funds have market risk, and 2008 was a horrible year for the stock exchange. Let's take a more in-depth look at the risk involved.

If you intend to retire in 2040 and invest in a target retirement 2040 fund, 90% or even more of your assets will be invested in stocks. Should the currency markets drops 40% as it did recently, expect that you're going to lose almost 40% of your investment value. A 2050 target fund could possibly be 95% invested in stocks.

If you intend to retire in 10 or 20 years, beware that a 2020 target retirement fund will be about 60% invested in stocks and a 2030 fund about 80%. If you are uncomfortable with this risk, consider putting all or several of your retirement assets in to a safer target fund. By way of example, try Community Developer Authorize a 2010 fund bought today would only be about 25% invested in stock funds.