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An IRA or 401(k) is like an empty piece of luggage that you take on your journey to retirement.
You must choose what to pack inside it—stocks, bonds, cash—or else the firm that handles your account will choose for you (if that ends up being a cash account, you'll miss out on the opportunity to earn bigger returns by putting at least a portion of that money in stocks).

There is no "best" retirement investment.
What's right for you and for your closest friend can be wildly different, depending on a variety of factors: your age, whether you will have other retirement income sources (Social Security, a pension, an inheritance), your appetite for risk. If you invest through an employer-provided plan, look for educational material on the company Web site to help you choose the right mix. If you're investing on your own, consider consulting a trusted financial adviser. Overall, I recommend subtracting your age from 100 and putting that percentage in stocks (so if you're 30, that means 70 percent).

Diversification is key.
When you invest through a retirement plan at work, you're usually offered a menu of mutual funds, which provide a basket of investments in one shot. With your own IRA, you can also build a diversified portfolio by opting for low-cost exchange-traded funds (ETFs): Each fund holds dozens if not hundreds of investments.

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