Ariel Skelley/Getty Images Often, when investing in a retirement account, people end up inadvertently titling their overall risk profile in their combined accounts into either too much risk or too little risk. They can also end up not fully utilizing the tax advantages inherent in their qualified-retirement accounts. You want to invest prudently in all of your investment accounts, as you will need your money to grow over your lifetime. But how do you decide which types of investments should go into your retirement accounts vs. your taxable accounts? It is best to start by deciding on the contents and weightings of your overall investment portfolio. It is advisable to first talk to a financial planner to make sure you map out how long your money will be invested, and when you plan to start taking money out of your accounts. Establishing the appropriate risk profile of your overall portfolio is probably the most important decision you have to make. Then, you and your planner can decide on your diversification allocation across a variety of asset classes and styles of investment. Such investment categories should include a variety of domestic and international stocks and bonds as well as an allocation to short-term low risk savings. Small amounts of nontraditional asset classes, such as real estate investment trusts and commodities, can also help balance out the risk and return of your overall portfolio. Only after you have decided on the contents of this total portfolio and your investing time horizon, should you then move to the next step of allocating the investments across the different types of accounts.
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