Coming off a year in which the stock market lost nearly 40%, there is no shortage of investment mistakes to discuss. The good news about retirement investing is that for most people, some mistakes can be smoothed out over a period of several years before the money is needed. The key is to avoid errors that can cripple your retirement prospects.

What kind of mistakes can have such a devastating effect? Mistakes that fall into one (or worse, both) of the following two categories:

• Disproportionately large mistakes—those that impact a large chunk of your portfolio.
• Chronic mistakes—those that drag your portfolio down year after year.

Besides not buying investments from anybody named Madoff, how else can you avoid retirement investing mistakes? Here are six examples of investments to avoid:

1. Overly short-term investments. Sure, the stock market these days seems about as safe an investment as your average blackjack table. But unless you are retiring tomorrow, running scared into safe investments that don’t pay much is a recipe for failure. Most retirement plans depend on a growth assumption as part of the formula for meeting retirement goals. If you put all of your money in low-yielding vehicles, you’d better plan on eating a lot of peanut butter and pasta in your golden years.
2. Illiquid investments. At the opposite end of the spectrum are people who invest in things like collectibles and other illiquid investments. Not only is there no guarantee you’ll be able to convert these to cash when you need to, but since there is no open market for them, they are highly susceptible to manipulation. And while it’s easy to justify purchasing a fancy car or expensive piece of art by calling it an investment, don’t kid yourself—it’s more likely to lose value than pay dividends.
3. A 401k which you’ve borrowed against. Treat your 401k like a porcupine—hands off! While preferable to incurring the tax penalties of taking money out of it in an emergency, borrowing against a 401k should be a last resort. While your retirement balance will appear intact, meeting the payback requirements might well hamper your future savings. Also, in many cases you’d have to pay back the balance immediately if you lose your job.
4. Too much company stock. 401k plans often allow investing in the employer’s stock. It’s good to feel you have a financial stake in the future of your firm, but not if it means putting all your eggs in one basket. If your employer drops that basket you could end up with one big omelette—and no job or retirement money.
5. Non-diversified investments. Speaking of eggs in one basket, another mistake is failure to diversify. Too much investment in one stock—or in one type of stock—increases your exposure to certain economic risks. Just like eating nothing but pizza every day (once you get out of college) could make you sick, too much of any good thing is unhealthy for your portfolio.
6. Over-diversification. On the other hand, over-diversifying offers no benefit—and splitting your money between dozens of funds and stocks can really drive up your transaction and management costs. So unless you LIKE getting nothing for something, simplify your life and your portfolio. People are often surprised to find that you can achieve full diversification with as few as 20 stocks, as long as they are sufficiently different from one another.

So make sure that your investment vehicles aren’t clunkers. Avoid these six big errors—and enjoy many happy returns when you finally turn sixty-five.