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Learning how exactly to invest requires time and energy. Fortunately, mutual funds have simplified investing for the regular investor. Within the past number of years the process of selecting mutual funds has been made easier. Target retirement funds are now available through major mutual fund families, and link are offered 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 and perhaps sales charges. Professional money managers handle all the investment decisions in accordance with 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 could be appropriate if you plan to retire within two or three years of the year 2030.

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

Target retirement savings tend to be 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 into 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 few years.

If you're already retired and don't know-how to invest, you could 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 will not get much easier. Plus, you may save thousands on mutual fund sales charges by purchasing one of these funds through a no-load mutual fund family instead of through an investment professional.

Target funds will be 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 higher amount of income in retirement.

The problem is: should you not understand investment basics or how to invest determined by your personal risk tolerance, you might select a target fund that is not really suitable for you. Basically, the same shoe will not fit all investors of a given category. Some young adults are conservative, and lots of 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, and in 2008 the majority of them did. Why? As these funds have market risk, and 2008 was a horrible year for the stock exchange. Let's take a closer look-at the risk involved.

If you plan to retire in 2040 and invest in a target retirement 2040 fund, 90% or more of your assets will be invested in stocks. Should the stock exchange drops 40% as it did recently, expect that you'll lose almost 40% of your investment value. A 2050 target fund might be 95% invested in stocks.

If you plan to retire in 10 or 20 years, beware that a 2020 target retirement fund will be about 60% invested in stocks as well as a 2030 fund about 80%. If you're uneasy with this risk, consider putting all or some of your retirement assets into a safer target fund. One example is a 2010 fund bought today would only be about 25% invested in stock funds.