There have been many changes in the investment industry over the years and the trend has favored individual investors tremendously.

Today, we have low cost mutual funds and commission free trading, plus a wide variety of investment products.

One of the relatively new developments are target date funds. Target date funds allow investors to use a diversified mutual fund based on their age and the fund will adjust over time to become more conservative as the investor ages. Today over 50% of all retirement fund assets are going into target date funds.

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In general, younger people should have a greater percentage of their portfolio in equities and add more fixed income as they approach retirement age and then enjoy their retirement years. Investors should also have exposure to foreign stocks and bonds for diversification purposes.

People in their working years normally also do not invest a lump sum into the market. Most people average into the market through their retirement plan. This is known as dollar cost averaging. When you’re averaging a set amount of money into the market, market downturns, known as bear markets, can be your friend.

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The market is currently at record levels and at some point in the future there will be another downturn. Stocks as measured by the S&P 500 dropped by more than 50% after the dot com bubble burst in 2000-2002 and the housing crisis in 2008-2009. Investors who kept averaging funds into the market during those bear markets have seen some very good results.

Target date funds can also be a good way for investors to be mentally and emotionally prepared for the inevitable downturns that will occur in the market. By having a plan and knowing that your portfolio will automatically adjust over time, that can help take some of the emotion out of your investment decisions.

Legendary value investor Warren Buffet once said, “Be fearful when others are greedy and be greedy when others are fearful,” he also said, “Other people’s fear is your friend, because it dives the price of stocks down. Your own fear is your enemy.”

Having an age based adjustment strategy in place can help with those emotional decisions. Target date funds can also be used as part of your portfolio, combined with other investments. Adding a value based fund can be a good way to increase the potential performance of your portfolio over the long haul.

Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at http://www.sellacalloption.com or 775-657-8065. The mention of securities should not be considered an offer to sell or solicitation to buy investments mentioned. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals. Past performance is no guarantee of future results.