Target retirement funds are designed to be the only investment vehicle that an investor uses to save for retirement. Also referred to as life-cycle funds or age-based funds, all you have to know is the date you intend to retire. Say you're 40 now and want to retire when you're 65. You pick a target-date fund whose date is the year you turn 65 - that is, 25 years from now.

Based on that information, the fund will do all the work for you, essentially creating an entire retirement portfolio in one fund. When you're younger, the fund will invest mostly in stocks, in order to take advantage of stocks' superior long-term growth. As you get older, it will gradually shift more money into bonds to take advantage of bonds' greater stability. It may throw some cash into the mix as your retirement date approaches. The main disadvantages that fees for these funds are higher. As such, expenses must be a point of consideration when choosing these funds.