Desperately Seeking Diversity, Simplicity

If you think it's hard to choose the right investments, you're not alone. Investors who want their portfolios to be easier to manage and more diverse are driving the demand for all-in-one investment options.

Strategic Insights, a market research firm that works with the mutual fund industry, says that more than two-thirds of the $150 billion that investors put into mutual funds in 2004 went into products that help spread out investments.

So, what are these investments that do everything? In a nutshell, they are professionally managed funds that have a wide range of investments and can be used as a complete portfolio. Most of the time, they come in two flavours.

1. Lifestyle or life-cycle funds are geared toward a certain level of risk. These can be a good choice for investors who want a diversified core investment with a certain level of risk and potential reward.
2. Age- or target-year-based funds aim to reach a certain investment goal or time frame. As each fund's target year gets closer, its exposure to stocks (and risk) will go down, while its exposure to bonds and money market investments will go up. This is done to lower risk and protect capital. These funds can be good options for investors who want a core investment strategy for planning their retirement or who only have a certain number of years to invest.

American Century has both kinds right now. My Retirement Portfolios is a set of five funds that are based on your age or target year. One Choice Portfolios is a different set of five funds that are based on risk.

Both portfolios are made up of stocks, bonds, and money market funds from American Century. The managers of the portfolios change the asset classes and weightings to put more emphasis on the investments they think have the best chance of producing results.

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

Ask for a prospectus, which has information about the investment's goals, risks, costs, and other things that you should carefully read and think about before investing.