What's in Your Retirement Portfolio?

The turtle. You're much more cautious than the lion, yet you don't mind having up to 60 percent of your money in stocks. Primarily you're interested in some capital growth with an eye on preservation and income, although you know you could still lose money in this portfolio.

You may be nearing or just starting retirement and you can stomach some market risk. You're willing to accept some modest losses now as a defensive but long-term investor.

• High-dividend growth funds. Rather than bulk up on individual stocks with healthy dividends, invest in ETFs and mutual funds that track a whole portfolio of companies with records of growing their dividends consistently. Consider those that focus on utilities, health care, energy and consumer staples.

• Balanced mutual funds. These funds generally have a 60 percent stock, 40 percent bond mix. Another similar consideration is a flexible asset allocation fund that can move in and out of stocks, bonds and other asset classes as market conditions change.

• Corporate/municipal/emerging-markets bonds. Highly rated bonds offer higher yields than Treasuries. Municipal bonds make most sense for people in the highest tax brackets who hold the notes in taxable accounts. If you buy individual bonds, hold no more than 10 percent of your portfolio in any one issue, and only seek those with the highest-possible credit ratings. Mutual funds and ETFs also hold pools of these debt securities.

• Global real estate. Consider ETFs that give you exposure to international commercial real estate through publicly traded real estate investment trusts. The yields are more generous than government or corporate bonds, and you'll obtain more diversification.

The ostrich. You do not like risk. You have no desire to risk even a small portion of your principal. While you realize that yields these days are pathetic, you're happy protecting what you have and you need this money to cover living expenses. You'd prefer not to look at the business headlines at all. This is a portfolio for preservation of capital with some protection against inflation.

• U.S. Treasuries. You can buy ETFs or mutual funds that invest in short-term Treasury bonds (five years or less in maturity). Even with the downgrade of U.S. debt by Standard & Poor's, they are still highly liquid and safe.

• Money-market funds/accounts. This is a parking place for cash in which yields are paltry. The best rate is 0.06 percent (as of publication). Money-market mutual funds are not insured, but money market bank accounts carry FDIC insurance up to $250,000. The best deals are online, though right now they rarely exceed 1 percent. Also try your local credit union.

• Treasury inflation-protected bonds (TIPS). Although inflation is low now, it could come roaring back, and that would depress bonds (and bond funds). The U.S. and other governments sell bonds that have yields indexed to a cost-of-living gauge such as the consumer price index, so if inflation returns, you'll actually make money.

These should be a staple of the other two portfolios as well. You can buy TIPS (and their cousins iBonds) through the U.S. Treasury directly.

• Fixed-rate annuities. If bought from a top-rated insurer, these may be good vehicles to guarantee a fixed monthly payment. Bypass brokers and agents and buy them directly from issuers to avoid commissions. Most large mutual fund companies offer them as well.

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