For all too many otherwise smart people, investing is a zero-sum game. You either invest in growth stocks like Google (Nasdaq: GOOG ) , Apple (Nasdaq: AAPL ) , Monsanto (NYSE: MON ) , or Celgene (Nasdaq: CELG ) -- each of which boasts earnings-growth estimates of 20% or greater for the next five years -- or you seek out value plays like General Electric (NYSE: GE ) , Berkshire Hathaway (NYSE: BRK-B ) , or Microsoft (Nasdaq: MSFT ) , stalwarts that trade at forward price-to-earnings (P/E) ratios below that of the broader market.
Putting your money in equities or bonds is another ill-advised zero-sum calculation, as is investing just in individual stocks or mutual funds.
Trouble is, committing exclusively to one of these directions means ultimately having to say you're sorry. The market really does move in cycles, sometimes spastically so: Witness the S&P's steep decline for the year to date.
You could stop a clock
Like a stopped clock, either/or investors will be right from, um, time to time, but over the long haul, their chances of sleeping or, perchance, of dreaming peacefully at night while beating the market are significantly diminished.
The good news is that avoiding that fate is relatively light work: Don't focus myopically on one approach to investing, and don't just try to cherry-pick individual stocks that you hope will be winners. Instead, focus on building a smart portfolio that will see you through to your golden years while keeping volatility in check.
One for the money
For my money -- and, I'd argue, yours -- the best way to get that done is by plunking down the lion's share of your retirement savings on a compact portfolio comprising a set-and-forget lineup up of carefully vetted stocks, funds and ETFs
With, say, 70% to 80% of your hard-earned moola invested in the well-diversified picks that we've recommended to members of Ready-Made Millionaire -- a lineup in which the Fool has invested a million bucks -- you'll be in a good position to earn market-beating returns and, if you're so inclined, have some fun supplementing that core portfolio with picks you've uncovered with your own due diligence.
Step right up
Lots of folks see investing as a game, a competition in which they make bets on which stocks Mr. Market will declare All-Star contenders and which he'll send back for a stint in the minors.
Make no mistake: Investing can and should be fun, but there is no off season. Thanks to the miracle of compound interest, the better job you do on defense (i.e., preserving your principal), the better job you'll necessarily do on offense (i.e., growing your principal so it'll meet your needs in retirement).
How best to proceed?
Well, biased though I am, Ready-Made Millionaire is a great place to start, but you'll need to wait until it reopens this October to do so. Between now and then, we'd encourage you to spend quality time with a special free report -- The 11-Minute Millionaire -- which is chock-full of practical investing tips that will help you grow and protect your nest egg. Just click here to learn more about Ready-Made Millionaire and snag a free report that can help you beat the market while clamping down pesky volatility.
This article was originally published May 30, 2006. It has been updated.
Shannon Zimmerman runs point on the Fool's Ready-Made Millionaire service, and at the time of publication didn't own any of the securities mentioned above. Apple and Berkshire Hathaway are Motley Fool Stock Advisor recommendations. Google is a Rule Breakers pick. Berkshire Hathaway and Microsoft are Inside Value choices. The Motley Fool owns shares of Berkshire Hathaway. You can check out the Fool's strict disclosure policy by clicking right here.