NEW YORK (CNN/Money) - My 401(k) doesn't offer many choices of mutual funds, so I'm investing 100 percent of my account in the Standard & Poor's 500 index fund my plan offers. I am 36 years old and have many working years left. Is this a wise choice for me, even considering the lull the market is in?

-- Tedd Froehlich, San Diego, Calif.

First of all, let me congratulate you for your aggressive investing strategy in the face of daunting market conditions. While many of your fellow 401(k) participants are hightailing it into bonds or capital preservation accounts -- even participants younger than you -- you have the foresight to realize that you are dealing with a very long-term investing horizon and that, therefore, stocks are the place to be.

In fact, I think one can argue -- and I have recently -- that considering what's happened in the market and the economy the past two years, stocks are actually a particularly good place to be for anyone interested in earning attractive long-term returns.

That said, though, I'm wondering if perhaps you're a bit too aggressive here by sticking your entire 401(k) stash in stocks, and S&P 500 stocks at that. Here are my concerns:

First, even though I believe stocks should still constitute the core of any long-term investors' portfolio, that's a long way from saying I believe they should be the only investment one holds.

Yes, stocks have an excellent long-term track record, and their record looks even better if you measure stocks' long-term gains after they've taken the kind of hit they have since early 2000. But history does not necessarily provide a crystal ball into the future. While I would expect stocks to continue to outperform bonds on a long-term basis in the years ahead, I also believe it's a good idea to hedge one's bets.

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That's why I think it's a good idea even for young investors like yourself to put at least some of their money into bonds, or, most likely in your case, bond funds. This way, you don't have all your money riding on one asset class. If stocks don't reprise their glorious history of outstanding performance, you've at least got a chance to earn some money in bonds.

There's no specific percentage of bonds I think you ought to have -- that depends on how much you're willing to see the value of your portfolio bounce around in the short-term and how much you're willing to hitch your financial future to one asset class. But my guess is that you ought to have somewhere in the neighborhood of 10 to 25 percent of your assets in bonds.

For more on how to figure a mix of stocks and bonds appropriate to your situation, click here.

My second concern is that whatever stock stake you end up with, I don't think it should all go into the S&P 500. Why? Because the S&P 500 is an index made up almost exclusively of large-cap stocks -- that is, large, well-known established companies.

Nothing wrong with that particularly. But I think it's a good idea for investors also to hold shares of small companies. Although they are more volatile than the big behemoths, small stocks offer the opportunity for outsize gains. Indeed, over long periods of time, they have outperformed their large-cap brethren by two percentage points a year or so. Again, no guarantees, but it's reasonable to expect higher returns on small stocks because they tend to grow faster than the big boys.

Plus, there's the diversification argument again. Just as I don't think it makes sense to own only stocks and no bonds, I don't think it's smart to own only large-cap stocks and no small fry. So I would recommend putting some of your stock stash into a fund that buys small-cap shares. Again, the asset-allocation link I cited above can help you decide how much.

MORE ASK THE EXPERT Ask the Expert Ask the Expert: Investing Ask the Expert: 401(k) and your retirement

One final note: If you can't find a bond or small-cap fund you like in your 401(k) plan, don't let that stop you from building a well-rounded portfolio. You can achieve the same level of diversity by investing in bond and small-stock portfolios outside your 401(k), although you will have to come up with more money to invest, of course.

One way or another, though, it's important to structure your holdings so that you're spreading your money among several asset classes, not just one, no matter how credible that asset's track record may be. All or nothing bets are okay for money you want to gamble, but certainly not for your retirement stash.

Walter Updegrave is a senior editor at MONEY Magazine and is the author of "Investing for the Financially Challenged." He can be seen regularly Monday mornings at 8:40 am on CNNfn.