Martin Stankis, 63, a recent retiree in Parkton, Md., would rather hike the Appalachian Trail than stay home and manage his retirement portfolio. New Yorker Beth Helfont, 57, has the time—but not the inclination—to chart her own investment strategy.

That's why both of them—like a growing number of older Americans—have put their retirement portfolios on autopilot by investing in a new type of mutual fund known as a targeted lifecycle fund.

MIXING AND MATCHING

These funds automatically shift toward a more conservative mix of stocks, bonds and cash as they approach a designated retirement year. Investors choose a fund with a target year that fits their own retirement timeline, and the fund manager (or a computer model) does the rest, gradually selling stocks and buying bonds or money market funds as the target year approaches.

Helfont chose the Fidelity Freedom 2010 Fund for her rollover retirement account so she wouldn't have to worry about overlap among different funds or putting too much of her money in stocks or bonds. "I figured I'd give myself a break and let an expert take care of my retirement fund so it was one less thing I had to think about," she told the AARP Bulletin.

Stankis chose the T. Rowe Price Retirement Income Fund, a targeted retirement fund aimed at investors who are already retired. It includes 40 percent stocks and 60 percent income investments, a mix that should keep up with inflation and generate money for living expenses. "I liked the mix that I saw, the prospect of the fund changing as my needs change, and I liked leaving the decisions to a professional," Stankis says.

Stankis and Helfont are by no means alone. Many retirement-minded investors are bewildered—sometimes even paralyzed—by the dizzying array of investment choices in front of them, and these targeted funds provide an easy answer. Experts say that's one of the big reasons investors put nearly $5 billion into targeted lifecycle funds last year, pushing the total assets in such funds to more than $21 billion, according to Financial Research Corp. in Boston.

In just the past year and a half, two of the mutual fund industry's biggest players—the Vanguard Group and T. Rowe Price Group Inc.—were among the firms unveiling their own versions of targeted lifecycle funds. Fidelity Investments has offered them since 1996; last year they were among the fund family's best sellers.

"We had a big surprise when we looked at who was buying these funds and how fast they were selling," Jerome Clark, who manages the T. Rowe Price retirement funds, told the Bulletin. Investors who see themselves as "delegators" or as "too busy" are likely to be happy in lifecycle funds, Clark says. Do-it-yourself investors, those who like to trade often or those who might have much more complex investment issues—family business investments, for example—may need a made-to-order approach.

KEEPING IT SIMPLE

Lifecycle funds typically have target retirement dates, such as 2020 or 2035, in their names. They fall into the category of "funds of funds" because they contain a combination of equity, fixed-income and money market funds. As the target date approaches, the funds shift to more conservative asset mixes.

The T. Rowe Price Retirement 2020 fund, for example, consists of 78 percent stock funds and 22 percent bond funds. Within 10 years, investors can expect it to move gradually to a mix of 66.5 percent stocks and 33.5 percent bonds, mirroring the current composition of the Retirement 2010 fund.

Mark Wilson of Tarbox Equity, Inc., a Newport Beach, Calif., financial advisory firm, often recommends lifecycle funds to clients who want one-time advice about how to invest within their 401(k) plans or rollover accounts. "It's hard to argue that someone would not be well-suited with a low-cost, globally diversified, automatically rebalanced, well-built mutual fund," Wilson says.

Not all financial advisers, though, are fans of the one-size-fits-all approach. "It's like saying everybody age 50 is the same—you look alike, you eat the same foods, you have the same assets, you have 2.3 kids," says Joel Framson of Allied Consulting Group, a financial advisory firm in West Los Angeles.

Framson also doesn't like the fact that many lifecycle funds lock investors into having their entire portfolio managed by a single company. "They are a great gimmick, and they sound like a good idea," Framson says, "but you may end up getting mediocre results with only one company."

But in a volatile market, mediocre results might not be so bad, counters Kerry O'Boyle, an analyst with Morningstar Inc., the Chicago-based research firm. "They're not going to top anybody's performance charts," he says, "but they should give steady returns over the long haul."

In fact, results are hard to measure because so many of the lifecycle funds are so new and because they shift assets from one fund to another.

EASY DOES IT?

One-stop shopping isn't completely effortless. Even the most research-shy investor has a little work to do before getting into these funds, because the offerings are different from one another.

Neither the Vanguard nor the T. Rowe Price lifecycle funds tack advisory or management fees onto the prorated fees of the underlying funds. The Fidelity lifecycle funds are marked up an additional 0.08 percent ($8 a year on a $10,000 investment).

The portfolios are different, too. Vanguard's underlying funds are made up of index funds, which have the lowest costs and are not actively managed. The Fidelity Freedom Funds are composed of 16 to 19 different funds, with a heavy emphasis on stocks of large U.S. companies. Its 2010 fund, for example, has 46 percent in stocks, with only 2 percent of that in small cap stocks and 5 percent or less in foreign stocks.

T. Rowe Price's funds are more stock heavy and focus a bit more on foreign stocks. The T. Rowe Price Retirement 2010 fund has 9.5 percent in foreign stocks and 7 percent in small-company stocks of a total of 66.5 percent in stocks. Even its Retirement Income Fund, aimed at those already retired, keeps 40 percent in stocks—roughly twice what the other funds hold.

As might be expected, the difference in mixes shows up in results, so investors should carefully choose their one-stop funds before putting them on autopilot.

The T. Rowe Price Retirement Income Fund, which started in October 2002, generated a 13.3 percent return for investors last year, according to Morningstar. That's more than twice the 5.9 percent return of the Fidelity Freedom Income Fund for the same period. In the past year, of course, stocks have done very well and bonds less well; in a reverse market you'd expect the Fidelity fund to do better.

THE ONE AND ONLY

Besides picking the fund family and approach that seems to be the best fit, investors should consider a few other points in choosing a lifecycle fund. One example: Investors who use lifecycle funds for just a portion of their investments—say, within their 401(k) plans—can defeat the design of the funds by surrounding them with other investments.

"It's a misuse to allocate some of your portfolio to equities, bonds and lifecycle funds," says Jeff Tjornehoj, a research analyst with Lipper, a global research firm. "You may have conflicting goals between them. These funds are constructed assuming they are the only one you hold."

Linda Stern is a freelance writer in Washington, D.C.