As an investor prepping for retirement, the ultimate goal you want to work towards is having a well-chosen asset allocation. Through diversifying retirement portfolio asset allocation, your asset classes will be nicely mixed, and your investments will basically do the work for you.

Since small-company stocks provide greater returns in the long-run, it’s wise to invest in less smaller companies. However, these stocks are riskier in comparison to larger companies (which are less volatile), it’s recommended that you have a good mix of both to balance out your portfolio,

To further diversify your investments, you may want to invest in mutual funds, which seek growth stocks (these typically have rapidly accelerating profits and sales), as well as mutual funds, which focus on value stocks (these grow at a slower pace but are much cheaper).

Another component you may want to add into your portfolio is a mutual fund that invests in foreign stocks, which move differently than U.S. stocks, so the returns may yield gains, even when the U.S. market is not doing as well.

Whether you’ve been investing for a while or you’re just starting out, having a diversified portfolio will protect you from catastrophic losses, as well as minimize your risk. As we discussed, earlier, different stock types dominate the market at different times, so having a little of each investment type will yield gains, regardless of which investment falls out of favor or adversely, falls into favor.

As an individual preparing for retirement, diversifying retirement portfolio asset allocation will help you grow your money simply by strategizing. Asset allocation is key to ensuring your portfolio earns you money for those golden years, and gives you financial security. For more consultation on diversifying retirement portfolio asset allocation, see our section on investing and retirement, and consider consulting a financial planner for help.

Katherine Muniz

Katherine Muniz

Katherine is a staff writer at Her columns focus on college finances, student debt and consumer spending.
Katherine Muniz