Question: Having had three job changes, my investments are in three locations, with a fourth about to start. I have a Roth with Merrill Lynch, 401(k) with Vanguard and 401(k) with Principal Financial Group. Is it a benefit to combine all investments into one account? I need to educate myself on my money. Most that I have invested is in aggressive funds. I am 47 and getting older each day!! Jeff, Tulsa, OK

Answer: Your experience is common. People change jobs over time and one consequence is they end up with a string of retirement savings plans from different financial firms and a bunch of mutual fund investments. I think there are genuine benefits to consolidating the accounts. Before doing anything, I spend some time going over what you have and where you want to be invested. And you're still young!

(As an aside, I've been to Tulsa several times. I’ve always enjoyed my trips -- especially walking through the gardens at the Philbrook Museum of Art, wandering around the western art collection at the Gilcrease Museum and visiting the University of Tulsa.)

I am concerned that you have so much of your retirement funds in the more aggressive fund categories. The fundamental insight of finance is that you create the possibility of earning a higher return by taking greater risk. But there is no guarantee, even with a long-term horizon, that you'll make that higher return. You could lose out. You want a well-diversified portfolio.

For instance, stocks are riskier than bonds since equities represent the uncertain rewards for entrepreneurship, while bonds are long-term contracts that spell out when borrowers must make principal and interest payments. Despite the hours people spend agonizing over mutual funds and worrying over the market's every twist, asset allocation is the main determinant of your portfolio's performance. Asset allocation is a fancy way of saying that how you divide your money among the investment options available to you.

One way to figure out what kind of portfolio you should have is to think about your career and your goals. The more secure your income from work, the more risk you can afford to take with your portfolio -- and vice versa. You also want to come up with a sense of what would it take for you to have a minimally comfortable standard of living in retirement. You hope to do better, of course. But a minimal benchmark allows you to better match your investments with your retirement goals.

A good short book on how to invest over a lifetime is The Random Walk Guide to Investing by Burton Malkiel. It deals well with asset allocation, diversification, risk and return. Malkiel is an advocate for keeping it simple -- always good advice.

  

I would also look at in Risk Less and Prosper: Your Guide to Safer Investing by Zvi Bodie and Rachelle Taqqu.

The two authors make a strong case for investing with a conservative eye on downside risk rather than upside gain. I like the way they match up money with career and lifestyle.

Between those two works, you could develop a good idea about what kind of portfolio you want. And then consolidate your 401(k)s into that portfolio.