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By aliciamadamczyk
December 10, 2015
Money

There are two things to focus on when you’re selecting investments for your IRA or 401(k).

First, you want to look for funds that have broad diversification, meaning they’re exposed to the world’s markets. Don’t just consider how the funds have done in the past.

Second, you need to determine how much risk you’re willing to take. Stocks are more aggressive investments, while bonds are more conservative. The younger you are, the larger the percentage of your portfolio you should have in stocks. In fact, these financial experts recommend as much as 80% to 90% of your portfolio when you’re 25. As you get older, you can reallocate your funds.

Don’t want to figure out your distribution on your own? Use a target date fund. With a target date fund, you select the expected year of your retirement, and the fund naturally becomes more conservative the closer you get to that date. All you have to do is sit back and enjoy the spoils.

Read Next: The Simple Reason Why You Need to Invest

Advertiser Disclosure

The purpose of this disclosure is to explain how we make money without charging you for our content.

Our mission is to help people at any stage of life make smart financial decisions through research, reporting, reviews, recommendations, and tools.

Earning your trust is essential to our success, and we believe transparency is critical to creating that trust. To that end, you should know that many or all of the companies featured here are partners who advertise with us.

Our content is free because our partners pay us a referral fee if you click on links or call any of the phone numbers on our site. If you choose to interact with the content on our site, we will likely receive compensation. If you don't, we will not be compensated. Ultimately the choice is yours.

Opinions are our own and our editors and staff writers are instructed to maintain editorial integrity, but compensation along with in-depth research will determine where, how, and in what order they appear on the page.

To find out more about our editorial process and how we make money, click here.

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