In This Chapter

Ensuring you have the right mix of investments—a combination called your portfolio asset allocation—is an important part of protecting your retirement accounts. This asset allocation is a lot like a recipe for your portfolio. It tells you how much of each ingredient to add and helps you make changes to the recipe as you get older. But instead of flour, sugar, and baking soda, you’re using stocks, bonds, and cash.

Picking investments without a recipe means you could end up with too much of one ingredient and too little of another. And this could mean your portfolio is too risky to let you sleep comfortably at night or not aggressive enough to grow into a nest egg large enough to meet your retirement needs.

Deciding on an asset allocation and sticking with it is relatively simple once you know a few simple skills. Online tools and special mutual funds, called target-date funds, make building and maintaining a healthy portfolio a piece of cake.