The idea is straightforward and it has understandable appeal for individual investors keen to save for children’s education, retirement or some other major and expensive life event that will arrive at a date certain.
They are called target date funds. The idea is to mix asset classes generally considered more or less aggressive and, as the target date approaches and the investor will need his money, they automatically give more weight to more conservative investments.
Unfortunately, this market meltdown taught us that traditional notions of diversification (bonds versus stocks) don’t always work. This time around most traditional investment categories sharply fell.