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Hi, Ryan.

I am a fan of target retirement funds for investors who want to take a more hands-off approach to investing, or for those who want to be more active but are just beginning to learn about investing. These funds provide a reasonable mix of stocks and bonds, including all types of stocks (large caps, small caps, U.S. stocks, international stocks), and the funds are automatically rebalanced and gradually get more conservative as you approach retirement.

The reason you might be seeing better returns with the other choices is because a 75/25 stock/bond split over the past three years has proven to be a rather conservative allocation. However, it held up better during the 2008 recession. So, as always with investing, there is a trade-off with risk and return. Historically, if you're a couple of decades from retirement, then you'll earn higher returns from an all-stock portfolio, as long as you can tolerate the ups and downs. This doesn't mean you can't use a target retirement account -- you just choose a fund with a later retirement date, which thus has a more aggressive allocation.

Investors who want to take a more hands-on approach may want to choose other funds than target retirement funds, which seems to be what you've chosen to do. That's a perfectly fine solution -- it's what I do. But I follow the same principles by making sure I have funds that invest in various types of stocks.

As for your IRA, that's the place to buy individual stocks. For help with that, you can take a free trial to Stock Advisor or one of our other services ( As you suggest, what you choose in your IRA should complement what you have in your 401(k). For example, if you choose an international index fund in your 401(k), there's no need to also choose one in your IRA.

Robert Brokamp
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