not saving enough wrong amount of risk overconcentration chasing what's hot raiding retirement accounts overtrading, ignoring expenses

NEW YORK (Money Magazine) - A 40-year-old whose portfolio is in fixed income and cash is playing it too safe. A 60-year-old with the vast majority of his assets in aggressive growth stocks is playing with fire.

That's what Greg Choban was doing, but he didn't realize it. He felt like nothing could possibly go wrong. Back in March 2001, Choban, then 57, a former Army lieutenant colonel, retired as an information technology consultant.

He and his wife Nancy had amassed a $750,000 portfolio that, along with his army pension, they figured would support them in style. The Austin couple spent the first year of retirement traveling, and Choban bought and restored a Shelby Cobra convertible.

"I told my broker the only thing that could ruin my retirement was if we had a big crash in the stock market and I was to lose 20 percent, 25 percent, 30 percent of my holdings," recalls Choban. The broker's response: Can't happen.

But with the Chobans' racy mix of assets -- 77 percent in equities and 30 percent of that in tech stocks -- it could and did. By mid-2002, the Chobans' portfolio was down to $500,000.

A financial planner rebalanced their holdings, putting 57 percent in fixed income, the rest in conservative stocks. Still, Choban has gone back to work for now, and he's selling his favorite toy, the Cobra.

"It's a waste of time to cry over all that spilt milk," he says, sounding Army through and through. "You just have to move forward and try to rebuild."

To prevent the kind of mistake the Chobans made, you need to hold a mix of stocks (or stock funds), bonds (or bond funds) and cash that's neither too daring nor too conservative for a person with your goals at your stage of life.

Choosing that asset allocation may be the most important investment decision you'll make for 2005, so don't hesitate to seek advice. Many professional financial planners will help you set up a portfolio for an hourly fee.

For example, the fee-only planners in the Garrett Planning Network (garrettplanningnetwork.com) will work with you on an hourly basis or charge you by the plan. Expect to pay $1,000 to $2,000.

If you'd rather do it yourself, use CNN/Money's Asset Allocator.

"No one looks after your money like you do," says Jeff Claudio of Crestview, Fla. And few have been so successful at looking after their money as Jeff and wife Leonora. Email Millionaires in the Making: New York transplants to the Gulf Coast, Jeff and Leonora's retirement strategy pays off early.

It requires only that you answer a few simple questions about your investing time frame and your appetite for risk, and then it tells you how to allocate your finances to better your chances of reaching your goals without taking on undue risk.

If you already have an asset mix that makes sense for you, remember that market movements will favor one kind of asset over another and, in time, they will push things out of balance. So be sure to reset the mix periodically and rebalance as necessary.