It is an established fact that workers wanting to enjoy pleasurable retirement must plan in advance for it and part of such planning strategies is to embrace investments. A well-diversified portfolio that uses the right investments for specific objectives will help improve your chances of reaching your retirement goals.

You can help spread your risk by diversifying your investments across different asset classes such as equities, fixed-income, real estate, money market funds, and guaranteed accounts.

Since various investments can perform well at different times and under different conditions, diversification helps you offset the volatility of a single investment and take advantage of the earnings potential of several. Diversification is a technique to help reduce risk, but there is no guarantee that diversification will protect against a loss of income.

Historically, bond prices have tended to rise when stock prices fall, and vice versa.

Moreover, bond returns, while generally lower than stock returns, have fluctuated less.

It is nearly impossible to successfully move out of one investment into another at the best time on a consistent basis. Therefore, investing in more than one can help reduce your risk, and the performance of one asset can act as a counterweight to the other.

But effective diversification isn't just about balancing stocks and bonds. Spreading your investment dollars across broad asset classes as well as within them may improve your chances of weathering market conditions with your portfolio intact. Be warned however, that no investment strategy, however sound, can guarantee future results. The key is asset allocation by choosing and maintaining the right combination of investments to reach your goals, based on your risk tolerance and time horizon.

With investing, your risk tolerance should be based on two factors: your time horizon and your attitude toward investment volatility. For example, if you're not comfortable with the stock market's inevitable ups and downs, you may be inclined to weight your portfolio toward fixed-income investments such as bonds and money markets. The same holds true if you are pursuing a short-term goal-you can't afford to risk the money not being there when you need it. The further off your financial goal, the more risk you might be willing to assume by placing greater emphasis on equities; given the historically superior long-term performance. After all, a longer investment period will give you more time to make up for short-term losses. Also keep in mind that some equities are riskier than others.

Mutual funds and annuities are automatically diversified since they invest in hundreds of securities at once. The inherent diversification makes them less volatile than a single investment within the same asset class.

Although one fund might provide a certain degree of diversification, it is important to balance your portfolio with investments from different asset classes. Also, consider diversifying within the same asset class by selecting investments with different goals and risks. Also, try not to overload your portfolio with overlapping types of investments-a scenario that could inadvertently increase your risk.

Now it is time to use what you know about balancing risk and return to help you select the classes of investments best suited to the goals you're trying to achieve. Experts say that the way you distribute your funds among asset classes has more effect on your returns and success than the particular fund, account, or securities you choose. Remember, however, that diversification does not guarantee against losses.

Try to diversify with an eye toward all your assets, including tax-deferred retirement savings you may have at work; taxable securities you may hold through a brokerage, bank, or mutual fund company; bank savings and money market accounts; insurance policies; and even the value of your home. You want to look at your entire financial picture to set up the most efficient allocation strategy for your goals. Look for ways to create a better overall investment balance given your goals, risk tolerance and time horizon. And keep in mind, especially if you are young, that your most valuable asset may be your earning power, which should be protected with disability coverage and if you have dependents, life insurance.

The real estate asset class also provides further diversification with investments that don't always move with the overall bond and stock markets. You can enhance the balance of your portfolio and further spread your risk across holdings.

As much as we are the architect of our fortunes and misfortunes, it is our responsibility to ensure that we have fulfilled retirement. It is advisable that individuals should put in place arrangements that will ensure that they have access to funds that will enable them and their dependants to maintain an adequate standard of living after retirement.