A target retirement (or lifecycle) fund is a mutual fund that changes its asset allocation as time passes. The intent is to mirror what investors do as they are aging, shifting assets from riskier to more conservative investments. The funds were popularized the last few years because they handle all the heavy lifting, such as determining asset allocation and rebalancing, and offer a convenience otherwise unavailable.
A side benefit of this is that you could take advantage of target retirement funds to save towards specific goals. Do you plan on buying a house in 7 years? Consider saving with a fund with a target retirement date of 2015 (Vanguard Target Retirement 2015) and have all the hard work done for you. With an expense ratio of 0.19%, it doesn’t cost you all that much to take advantage of it.
Have kids going to college in 18 years? (or plan on having kids in 5 and hope they go to college in 23?) Find a target retirement fund that ends roughly when they do, couple it with a 529 plan, and you have a handy efficient way to save for college!