| Let's take the Vanguard Target Retirement 2045 Fund as an example. As I write, it has approximately 50% invested in the U.S. stock market, 33% in foreign stock markets, 12% in the U.S. bond market, and 5% in international bond markets. It also keeps a fraction of 1% of the assets in a cash reserve to meet redemptions. Some readers will insist they don't want or need global diversification. They will say that because international stock and bond funds underperformed U.S. financial markets for years. But the case for global diversification over the long term is solid. Investing internationally helps reduce overall portfolio risk by spreading investments across different economies and markets. When one region faces economic challenges, others may thrive, balancing out potential downturns. For example, during a U.S. economic slowdown, a portfolio with exposure to European and Asian markets could offset losses from American equities. There are unique sectors and innovative companies that are not available in our domestic market, such as wind energy in Scandinavia or rare earth minerals in Brazil. Emerging markets in Latin America, Eastern Europe and the Pacific Rim have high economic growth rates, potentially leading to better stock market returns. Holding assets in multiple currencies can protect against fluctuations in an investor's home currency. This adds an extra layer of stability to the portfolio, especially during periods of domestic currency weakness or high inflation. While global diversification doesn't always increase short-term returns, it has been shown to reduce "deep risk" - the risk of severe, long-lasting losses - over the long haul. It's worth noting, however, that international markets trounced the U.S. market last year. And they are doing so again this year. A globally diversified portfolio offers the benefits of reduced risk, increased growth opportunities, and improved long-term stability. That's why Vanguard constructs all its Target Date Retirement funds this way. Investors can make an initial investment and then have Vanguard debit their bank account for a certain amount each month, a widely used technique called dollar-cost averaging. (By investing a fixed amount at regular intervals, investors end up buying more shares when they are low and less when they are high, improving their cost basis.) I suggest these Vanguard Target Date Funds because - after 40 years as an investment advisor - I know no other way that smart investing could be made simpler. The funds are diversified, convenient, cost effective, and offer an easy glide path from higher risk to lower risk as investors grow closer to retirement. I describe the benefits more fully in my new book "The American Dream: Why It's Still Alive … and How to Achieve It." For more information - or to pick up your own discounted copy - click here. Are these funds the very best portfolio that any investor could possibly have? No. They offer limited control, are not personally tailored to the individual, and are less tax efficient in taxable accounts. Yet they are still a heck of a lot better than what most investors do on their own - or through a high-paid investment "professional." This strategy's greatest strength is its simplicity. Complexity and confusion are big stumbling blocks for young, new or relatively unsophisticated investors. If I had a friend or relative who wanted to invest but didn't have the time or inclination to become an expert on the subject, I would strongly encourage an investment in one of these funds, which currently go out as far as 2070. There is no muss and no fuss. All they'd need to do is make an initial investment and then add to it or over time. How about once retirement is reached? Is there another fund that offers an equally simple way to generate income while protecting against the ravages of inflation? Indeed, there is. And I'll discuss it in my next column. Good investing, Alex | 
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