Exchange-traded funds have made it easy for individual investors to affordably invest in nearly anything––from hard commodity ETFs to international equity ETFs, individual investors have access to corners of the market that were previously accessible to only institutions.

But ETFs have also made it easy to invest in a targeted portfolio of common stocks and bonds by purchasing just a single security. These so-called “total portfolio” ETFs represent a new paradigm that is perfect for many individual investors looking to avoid money managers [see this interactive guide to Finding The Right Target Retirement Date ETF For You].

Target retirement date ETFs are “total portfolio” funds designed for retirement investors seeking an easy alternative to creating their own portfolio or using money managers. By investing in a single security, investors can gain exposure to a diverse portfolio of stocks and bonds that is customized to suit their investment objectives with ideal asset allocations; however, there are also many disadvantages that investors should carefully consider before buying.

Some advantages include:

▪ Single Security – Investors can purchase a single security that contains an inherently diversified and targeted portfolio of stocks and bonds. For example, the iShares Target Date ETFs contains exposure to around 6,000 different securities.

▪ Asset Allocation – Target Retirement ETFs are especially designed to maintain an asset allocation that’s ideal for investors retiring in a given year. For instance, those closer to retirement will be weighted more towards bonds than equities.

▪ Low Maintenance – Since rebalancing is done automatically, Target Retirement ETFs require very little maintenance, unlike maintaining a portfolio of stocks that may need to be refined every year or two based on changes in weight or mix.

Some disadvantages include:

▪ Double Costs – Target Retirement ETFs charge management fees, while the funds that they hold may charge their own management fees, too. For example, the iShares Target Date ETFs have management fees of 0.25% plus 0.21% in acquired fund fees and expenses, although there’s a fee waiver that results in a 0.32% net expense.

▪ Suitability – Target Retirement ETFs make broad assumptions based on a targeted retirement date, which means they may not be suitable for everyone. For example, a wealthier investor may want to take greater risks than a non-wealthy investor.