I'm fully contributing to my Roth IRA every year into a brokerage account that is 100% in mutual funds.
I've done basic mutual fund research and picked about 5 different funds that match what would be considered an appropriate allocation for where I am now in my life, and how long till I retire. I plan to re-balance it as necessary down the road.
I'm wondering if it wouldn't be such a bad idea to "hedge" my allocations and mutual fund picks by buying some shares in a life cycle mutual fund(s). These are funds that are designed to be rebalanced by the fund manager as their target date for retirement approaches.
I figure this might be a good corrective strategy to compensate for under performance due to bad picks or slightly-off-percentage-allocations I might make in the long run. Does this seem like a bad idea?
------ EDIT / New Thoughts - Jan 11, 2010 ------
I realized I wasn't taking advantage of my employer's 401(k) matching benefit, so I am going to open one of those up soon (as a Roth 401(k)). I'll designate the entire account to be in a target-date fund. I'll continue to manage my Roth IRA on my own, and let this be my "hedge" for my IRA as described above.
------ EDIT / New Thoughts - July 23, 2010 ------
My fund picks for my own Roth IRA has been consistently performing +1.5% relative to my target date 401(k) fund, over the last 6 months. That feels good =)
Still, does anybody else have any input or thoughts on this strategy?