Hello to all. I am a recent college graduate and am at the beginning of my career. My girlfriend and I recently moved in together in and apartment and have a combined income of about $90,000. Aside from college loans we are not in any credit card debt or things of that nature. I recently read the Richest Man in Babylon and am currently reading The Bogleheads Guide to Investing. My focus now is saving and planning for our retirement. Saving is not the problem I am currently having. My problem is that there are so many things such as stocks, bonds, mutual funds and IRA's that I am having a hard time selecting which ones to put in my portfolio. I definately want to diversify my portfolio but am having a hard time deciding the smartest approach. Some advisors say put the majority of your portfolio in bonds and others say put the majority in stocks. Im kinda of confused and just researching for some clarity and honesty.
I want to max out my portfolio conservatively. I don't want to take but so many risks and I want to allow my money to work for me gradually. I would appreciate some advice about the smartest ways to diversify my portfolio. I want to feel secure and confident in my portfolio and I would love any knowledge about the practice of diversifying my portfolio.

I'll save too many recommendations because I think you'll learn everything you need to know in Bogleheads Guide to Investing. I think it has all the answers you're looking for.

My "advice in a nutshell" is that since you say you want to be conservative, you can dedicate your age in % of your portfolio to bonds. The rest should be stocks. If this money is in a tax-sheltered account (401k/403b/TIRA/Roth IRA, etc etc), just find a cheap bond fund (like the Total Bond Market index at Vanguard or elsewhere), then split the stocks between Total US stock market index and an int'l index. Call it good.

You can get a little fancier based on how much space you have in tax-sheltered accounts. Taxable accounts aren't good for bonds, but stock indexes are pretty tax efficient.

I'd recommend an IRA at Vanguard, but that's up to you. Do you have a 401k?

(FYI, Vanguard has great Target Retirement funds, which is pretty much set it and forget, with bonds and domestic and int'l stocks. You may get a little more sophiticated later, but it's a great place to park retirement savings.)

Best of luck to you.

Ryan

To work off of what Ryuns said, here's a neat trick you can play with the target funds. In general, the closer to the "target" date these funds are, the more conservative they are. So if you want to play super-conservative, pick a fund that is actually BEFORE your target date.

I would recommend Vanguard, having now had 401k accounts with both Fidelity and Vanguard. The Vanguard offerings are much more comprehensive and user friendly than the Fidelity ones. I like being able to plow my money into a total index and forgetting about it, as opposed to into a mutual fund or limited index and worrying whether it was the right choice.

Vanguard's Web site has a nifty quiz where you can determine your risk tolerance.

Another general rule of thumb is that you should be able to stomach a 50% drop in your stock holdings. So if your portfolio is 80% stocks, you should be prepared to lose 40% of the value of your portfolio. You don't want to take on more risk than you can tolerate, because if your holdings lose a lot of money and you can't stand it and get out of the market, you are buying low and locking in your losses. You should only invest in stocks if you can stay the course.

I like the rule of thumb that was brought up in the last post. I usually go by the 50% theory as well.