Highlights

• Don’t be U.S.-centric in your investments. The world is your oyster.
• Beware the high fees of equity indexed annuities and equity indexed CDs.
• If you’re retired and your portfolio tanks, consider a reverse mortgage.

Whether you are just starting out or already in retirement, you may not be comfortable with recent market swings. That means your risk tolerance likely is low. Young investors should try to get accustomed to risk. They can capitalize on down markets by dollar-cost averaging, which enables them to buy fund shares on the cheap. Older investors can mitigate risk by limiting exposure to the stock market and making wise bond purchase decisions.

Investing through the ages

It’s hard to make retirement investing a priority when you’re just starting out in the work force. So many other life goals compete for a piece of your paycheck. That’s unfortunate because the money you contribute to retirement accounts in your 20s has the longest time to grow.

Find a place for retirement savings in your monthly spending plan and you’ll congratulate yourself later in life.

You’re also at a stage in life where you can take on a fair amount of risk in how you invest your retirement accounts. Buying into the market at current levels carries less risk to you because of how long you have until retirement.

Don’t be U.S.-centric in your investments. The world is your oyster. Search for pearls everywhere. Emerging growth and developed countries should be part of your asset mix. Don’t just invest in their stocks. Invest in their bonds and real estate, too. The real estate piece is most easily managed with real estate investment trusts, or REITs.

It’s important to learn enough about investing to understand your investment options and decide on an investment allocation. Many employers now provide some measure of investment advice along with the investment options offered in their retirement plans. If you can’t get comfortable with the advice, get a second opinion. I recommend getting a second opinion from a fee-based Certified Financial Planner. Use Bankrate’s CFP search tool to find a financial planner in your area (be sure to ask upfront how they’re compensated).

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Target-date funds with built-in asset allocation strategies have become a popular fund choice in retirement accounts and may even be the default investment option if you don’t pick your own funds when you sign up for the company retirement plan. With a target-date fund, you pick an investment horizon, usually around the time you plan to retire, and the mutual fund’s investment manager changes the investment allocation as you age, dialing down risk as you approach retirement.

While target-date funds are often touted as one-size-fits all funds, they may or may not be right for you, based on your needs and risk tolerance. Some offer little foreign stock exposure, for example. Read the fund’s prospectus before deciding on whether to invest in such a fund.