Consider Asset Allocation

One way to help protect yourself from market ups and downs is to develop an asset allocation strategy. Asset allocation is the process of spreading your investments among different asset classes: stocks, bonds, and short-term investments such as cash.

Your money is too important to invest without a strategy. Though the term sounds complicated, "asset allocation" means dividing up your investments in a way that makes sense for you. You should consider an asset allocation strategy that matches your unique financial needs, comfort with investment risk, and time frame for when you're planning to retire. In fact, the right asset allocation can help you maintain your confidence through economic ups and downs and even increase your potential for better returns over time.

When it comes to choosing how your savings are invested, be careful not to shortchange your interests by leaving long-term assets in highly conservative choices. Be sure to balance your need for growth, income, and safety.

If you are further from retirement, a portfolio with a higher allocation of stocks or stock funds may be appropriate. As you near retirement, however, you may want to gradually shift toward more conservative investments, such as bond or money market funds. A conservative strategy focuses more on the preservation of your assets.