When choosing where to invest my 401(k), I put 70 percent in an index mutual fund that is tied to the S&P 500. The remaining 30 percent I put in index funds tied to international, small-cap, and mid-cap stocks. I'm in my late 40s; do you think this is a smart move?—A.T., Arlington, Texas We don't think that anyone should have 100 percent of his or her 401(k) money invested in stocks, because a more diversified portfolio will help protect it from getting pummeled in economic downturns. If you were in your 20s you could afford to be heavily invested in stocks, but as you get closer to retirement you should probably shift to a more conservative, bond-centric portfolio. Many people in their 40s should consider placing about 30 percent of their investments in bonds. To achieve this you could take roughly half of the money you have invested in the S&P index fund and move it into a low-cost index bond fund.
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