NEW YORK (CNN/Money) - My husband and I, both retired, have $60,000 in mutual funds, but we seem to be losing money every day. We're thinking of moving our money to an investment where we can get a guaranteed 4 percent return. What do you advise?

-- Deena Scherer, Bedford, NY

The first thing I advise is caution, beginning with finding out what strings (and there will be strings, believe me) are attached to that 4 percent guaranteed return.

Do you have to lock in your money for a certain period to get that guaranteed 4 percent? If so, remember that if interest rates rise during the period you're locked in, your guarantee may feel less like a comforting shawl and more like a straightjacket preventing you from taking advantage of rising rates.

Are there any penalties for withdrawing your money? You can probably get a guaranteed 4 percent or better in a fixed deferred annuity, but it will likely come with surrender charges that could run upwards of 7 to 10 percent if you withdraw your money in the first few years. Or it may have a "market value adjustment" that reduces the value of your investment if you cash out after rates have gone up.

If you're thinking of simply buying a long-term bond and holding it to maturity to get your 4 percent guaranteed return, remember that if for some reason you must sell the bond before maturity, you'll get less than you paid if interest rates have risen since you purchased the bond.

But even aside from the question of conditions and strings that may be attached to a guaranteed return, there's the issue of whether moving all or even the bulk of your money into a single investment makes sense.

You're flouting the time-tested investing principle of diversification. Think about it. Retirement these days can last a long time -- 20, 30 even 40 years. Economic and market conditions are going to change a lot over a period that long. Indeed, as we've seen, they can change a lot over the course of just a few months.

One way to deal with the uncertain nature of the financial markets is to say that you're going to keep ahead of the curve by nimbly jumping from one type of investment to another as conditions change. I'd say that's unrealistic and, besides, if you're locking yourself into some sort of guaranteed return, you're automatically giving up flexibility anyway.

The better way to deal with the inevitable changes that will occur during retirement is to create a portfolio that consists of a variety of different investments that don't all react the same to market conditions.

So, for example, maybe you have a portion of your money in investments where your principal is protected -- say, CDs or money market funds -- so your entire retirement savings aren't at risk. Then perhaps another portion would be in bonds or bond funds that generate higher income than the principal-preservation part but are also a bit more volatile. You can keep the volatility of this portion of your holdings down, however, by sticking to bonds or bond funds with maturities of, say, 5 years or less.

But you also want at least a bit of your portfolio to generate some growth so that you maintain purchasing power and prevent your standard of living from slipping.

That means keeping some of your portfolio in stocks or stock funds. True, the value of this portion of your holdings will jump around more than the other two parts in the short-term. Over the longer term, however, this part of your portfolio should deliver higher returns.

The key, though, is to have money in all three of these areas so that your portfolio isn't dependent on the performance of any single type of investment or designed to prosper in only one set of market conditions.

As for creating this portfolio, you have several choices. You can create this mix yourself by assembling a portfolio of different types of mutual funds. If this option appeals to you, we've got a variety of tools on this site that can help, including our Fund Screener and Asset Allocator tool. You might also want to check out our Money 101 lesson on Asset Allocation.

A simpler route would be to buy a target retirement fund, which is a type of fund that automatically divides your money among stocks, bonds and short-term investments and diversifies your holdings within each of those asset classes.

What's more, the fund maintains an asset allocation that's appropriate for your situation -- in your case, someone who's retired. For more about these types of funds, click here.

Finally, you can go to a financial planner or other investment adviser for help, although if you're investing only $60,000, that option may be a little pricey.

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If you do go this route, make sure you know exactly what you'll be paying in fees and commissions upfront as well as any ongoing fees the planner may charge or that you will incur through the investments the planner recommends. For more on choosing a planner, click here.

Whichever way you go, make it your goal to come up with a portfolio that offers some flexibility and that can survive and thrive under a variety of conditions. Because that's exactly what you're going to encounter during your life in retirement.

Walter Updegrave is a senior editor at MONEY Magazine and is the author of "We're Not in Kansas Anymore: Strategies for Retiring Rich in a Totally Changed World."