A random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing

LIFE-CYCLE FUNDS
Do you want to avoid the hassle of adjusting your portfolio
as you age and rebalancing yearly as the proportions of your
assets devoted to different asset classes vary with the ups
and downs of the market? A new type of product has been
developed during the 2000s just for those investors who want

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to set up a program and then forget about it. It is called the
“life-cycle fund,” and it automatically does the rebalancing
and moves to a safer asset allocation as you age. Life-cycle
funds are extremely useful for IRAs, 401(k)s, and other
retirement plans.
You pick the particular life-cycle fund that is appropriate
by picking a date when you expect to retire. For example,
suppose, you are forty years old in 2015, and you plan to
retire at age seventy. You should then buy a life-cycle fund
with a “target maturity 2045.” Subsequent contributions can
be directed to the same fund. The fund will be rebalanced
annually, and the equity mix will become more conservative
over time. The major mutual-fund complexes such as
Vanguard, Fidelity, American Century, and T. Rowe Price all
offer life-cycle funds. Details of the different maturities and
the asset allocations offered may be found at the various
company websites. For those looking for the easiest way to
manage their retirement monies, the automatic pilot aspect of
life-cycle funds is a user-friendly feature. But before you sign
up, check the fee schedule. Low fees mean more money in
your pocket to enjoy a more comfortable retirement.

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INVESTMENT MANAGEMENT
ONCE YOU HAVE RETIRED
The oldest members of the baby boom generation, born in the
late 1940s, have already reached retirement age. According to
the U.S. Census Bureau, more than one million baby boomers
will live beyond the age of one hundred. A typical sixty-five-
year-old has an average life expectancy of about twenty
years. And half of all retirees will live longer than their
average life expectancy. Yet most boomers have not heeded
the advice in this book and have failed to save adequately for
retirement. We have been a nation of consumers rather than
savers. Given the long-run state of the federal budget, we
can’t rely on the government to bail us out.