Given the current financial crisis, it comes as no surprise that more investment advisors than ever before are touting the golden rule for investing in your retirement: diversify, diversify and diversify!  If you’re looking ahead towards retirement but are a bit concerned about the stability of the market, there’s no need to worry: even with current market conditions performing as they are, diversified investments are still one of the best ways to save up for a comfortable – and even luxurious! – retirement.

When you diversify your portfolio, you’ll see your overall profits stabilize in fluctuating markets, since the performance of one investment will often cancel out any negative impacts from other stocks and bonds.  This concept is what primarily drives your 401k, as the contributions to this fund are spread throughout various investments in order to lessen the impact of any negative performances.  For example, if a US stock that you’ve invested in is seriously suffering, the loss might be balanced out by investments in a thriving international market. Serious risk is incurred when a person primarily invests in one type of stock or bond; so if you’d like to retire with a healthy bank account balance, don’t let this happen to you!

So if you’re seeking to diversify your investments in order to boost your retirement savings, what exactly should you invest in?

Experienced investment firms and advisors will all give you this same answer: stocks, bonds and cash.  Bonds are typically safer to invest in than stocks, as they mature at a steady rate and provide more income opportunity than just cash.  However, while investing in stocks may provide higher risks – and more losses! – successful stock performances can provide far more income than that of bonds and cash.  However, if retirement is looming on the horizon, your registered investment advisor will usually advise against investing in too many stocks, as you might not have enough time to recoup potential losses. 

When discussing your portfolio with your investment advisor, be sure that he or she is on the same page in regards to your retirement plans.  At the end of the day, your advisor should select the type of diversified investments that will help you to reach your goals, depending on your age now and your desired retirement age. Visit www.iamllc.biz to learn more about reaching your goals.

For more information on smart retirement planning, visit www.kenhimmler.com, the IRA and 401K experts!

Authored by Kenneth Himmler, Sr.