Desperately Seeking Diversity, Simplicity

Posted by Nick Niesen on November 8th, 2010

If you think choosing the right investments is complicated, you're not alone. Investors looking for simplicity and portfolio diversification are driving demand for all-in-one investment options.

According to Strategic Insights, a market research firm serving the mutual fund industry, more than two-thirds of the $150 billion that investors added to mutual funds in 2004 landed in asset allocation products.

So what exactly are these all-in-one investments? In a nutshell, they are broadly diversified, professionally managed funds that can serve as a complete portfolio. They come in primarily two flavors.

* Lifestyle or life-cycle funds focus on a particular level of risk. These can be an appropriate choice for investors who want a diversified core investment solution that offers a specific level of risk and potential reward.

* Age- or target-year-based funds target a specific investment time frame or goal. As each fund's target year approaches, its exposure to stocks (and corresponding risk) will decrease and its exposure to bonds and money market investments will increase to reduce risk and preserve capital. These funds can be suitable choices for investors seeking a core investment strategy for retirement planning or who have a set number of years to invest.

American Century currently offers both types. My Retirement Portfolios is a series of five age- or target-year-based funds, while One Choice Portfolios is a separate series of five risk-based funds.

Both portfolios are made up of American Century stock funds, bond funds and money market funds. The portfolios' managers adjust asset classes and weightings to emphasize investments they believe provide the most favorable outlook for achieving results.

Doug Lockwood is a certified financial planner for American Century Investments.

Ask for a prospectus that contains investment objectives, risks, charges and expenses, and other information that should be carefully read and considered before investing.