5. Asset Allocation or Target Date Funds

Asset allocation funds are the simplest approach to diversify your portfolio. These are mutual funds that have a fixed stock and bond combination. A 60/40 fund, for example, will allocate 60% of its assets to stocks and 40% to bonds or cash. As a result, a portfolio whose asset allocation mix gets more conservative as the target date approaches.

For a fund that alters its risk term profile over time, target-date funds could be a good instrument. You will have to choose the duration, while the fund managers will do the diversifying, future adjustments, and rebalancing for you.