You may not have a lot of cash to invest and you probably can’t afford a professional to decide where those dollars should go. With access to a 401(k) for the first time, new hires entering the workforce may be at a loss when it comes to investing. What to do? Fewer workers can count on a pension to fund their retirement, and Social Security may not be able to either. But companies are beginning to embrace one option that makes investing easy for employees: target date retirement funds (also known as life cycle funds). Here’s why these funds often are a good fit for novice investors.

Get instant diversification Target date funds invest in a mix of stock and bond funds based upon your planned retirement date. They typically hold from 5 to 15 separate funds. You receive exposure to bonds, U.S. stocks of big and small companies and international stocks. All of which are essential to a well-rounded portfolio. Even if you’re investing in a target date fund on your own in an individual retirement account, you don’t always need to pony up the minimum initial investment for each fund. In fact, sign up to make automatic monthly contributions and you may need next to nothing. I’m signed up at T. Rowe Price, and they let me invest as little as $50 a month into any of their mutual funds. My wife and I both have Roth IRAs open there and for now, each IRA has a separate target date fund in it (T. Rowe Price Retirement 2040 & 2045 Fund TRRDX/TRRKX).

A pro decides the allocation Target date funds don’t stop with diversification. The fund sets the appropriate mix of stocks and bonds, automatic asset allocation, for you based on your retirement date. And over time, the mix gradually becomes more conservative as you move closer to kicking back. The help often is needed. A study lats summer by the Employee Benefit Research Institute found that 18% of young workers who participated in 401(k)s held no stocks, even though historically stocks beat out bond returns over long periods of time. The kind of time young investors have!

No need to rebalance Even if you have a cool enough head to pick the right asset allocation you may not remember to rebalance the portfolio regularly. Here again, target date funds to it automatically, helping prevent one asset class from becoming too large or too small and throwing you portfolio off kilter.

Many have default option Finally, a federal law passed last year gives companies greater license to automatically enroll employees in a 401(k) or other retirement plan. And more companies are looking to target date funds as the default option.

Despite their simplicity, target date funds DO require some of your attention. If you’re invested in one or would like to get started, keep these points in mind:

• The average expense ratio for target date funds with maturities in 2030 or later is 1.3%. Ideally, you want to pick a fund that charges the average or lower. As with all funds, the lower the fees, the more you get to keep of the fund’s return.
• A target date fund may not always invest as aggressively for the year listed. A fund company may invest a little conservatively to ensure your money is there when it’s time to retire. In other words, compare the asset allocation of several target date funds near the time you want to retire, option for the one that best matches your risk tolerance. That’s why I chose T. Rowe Price. They had the most aggressive allocation with about 90% of the fund in stocks at the time of purchase and will get a fairly healthy amount in stocks when the fund matures.
• Keep in mind that a target date fund is only as good as teh funds it invests in. Ideally, you want to choose a fund from a company that has investing expertise across a broad range of categories. There aren’t a lot of companies that have it. If you don’t like what you see, you always can pick a low cost index fund to start with instead.

And no matter what, you can’t go wrong with starting to save in your 20s!