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Coffee? Tea? Annuities?

There's a lot of fat in finance -- high-carb commissions for shoddy service, the empty calories of inactivity fees, the spare tire of mutual fund soft-dollar arrangements. And not all of them are spelled out on the label.

The similarities between investing and dieting advice are analogous -- "give us your money and we'll make it easy for you" -- as are the results of bad advice. Get your investment pyramid right and the engraved gold watch, the co-worker toasts at a Chili's happy hour, and the packed and gassed-up RV in the driveway are all yours.

A diet of yo-yo investing and fad fixes, on the other hand, and your savings thuds to the floor like a sack of wet white flour.

My co-Fool Robert Brokamp goes so far as to tell readers to stop eating your retirement, comparing America's penchant for overfeasting with the cravings that drive us to overspend. "Most people would benefit from considering what goes in their bellies and how much leaves their wallets," he writes. (I cringe as I type this paragraph while munching on a $10 salad -- healthy-looking, at least -- and soda from Cosi.)

The worst is when you pick a supposedly healthy snack, and it goes straight to your thighs instead.

The lame leafy greens
It happens a lot to well-meaning investors. They earnestly save for retirement -- putting away 10% or more of their salary into the stock market -- and then discover that their investments lacked the right nutrients to sustain them for the long haul.

Just look at the damage done to an investor's nest egg after paying just 1% extra in fees for a mutual fund. Let's say we have two investors, and each diligently deposits $250 a month into a mutual fund for 20 years. Before expenses are taken into account, both funds manage to post average annual returns of 10%. However, one fund takes out 0.5% in expenses, reducing its real return to 9.5%. The other fund takes out 1.5% in expenses annually, reducing its real return to 8.5%.

What is each retiree left with after 20 years? The investor who kept the caloric fee load down to a healthy 0.5% ends up with returns $190,271. The one who paid out 1.5% in commissions gets a check for $167,060 -- $23,211 less.

That $23,000 is the monetary equivalent of a lifetime of picking iceburg lettuce at the salad bar when spinach was available just one bin over.

So what about the retirees who avoid the crudites altogether?

What's in a Snackwell, anyway?
As the ranks of near-retirees and retirement wannabes grows, the financial industry cooks up more products and services that, upon closer inspection, are loaded with empty calories.

Just read the label on equity-index annuities (EIAs): "A healthy mix of fruit and fiber that allows you to reap the rewards of the stock market without exposing yourself to the side effects of downside risk."

Sounds like a great trail mix of performance -- loosely tied to the stock market -- and safety (a "guaranteed" return). Investors are certainly gobbling them up. Sales of EIAs are up 45% from last year, according to The Wall Street Journal. And that's on top of a 67% increase from the previous year.

But the rewards -- even in a good year for the market -- look more like consolation prizes. That's because of the costs investors pay to carry them. (Hey, you didn't think Wall Street was going to take on all the risk for free, did you?)

In this month's issue of Motley Fool Rule Your Retirement, we decipher the complicated structure of EIAs -- the participation rate, spread/margin/asset fee, calculation method, cap, and minimum return (or floor) -- and offer guidance as to when these products might be right for your portfolio.

Don't worry. We're not suggesting that you can't have any cake. It turns out that you can be thin and rich.

Healthy fiber for retirement portfolios
Real estate investment trust (REIT) expert Ralph Block, author of Investing in REITs, also offers a real long-term investing treat. REIT stocks returned 22.6% annually (as measured by the NAREIT Equity index) over the past five years. Compare that with -0.7% for the S&P 500 and 8.9% for the Russell 2000.

Real estate bubble or not, this is no fad. Consider: over the past 20 years, equity REITs have achieved average annual returns of 12.6% -- better than the broader market. And that's just one reason Block suggests that all investors devote a portion of their portfolios to REITs.

For retirees, that portion might be as much as 25%, according to Block. Since REITs are legally obligated to pay out at least 90% of funds from operations to shareholders in the form of dividends, they can supply retirees with a reliable stream of income, in addition to steady capital gains opportunities. Though not quite as safe as bonds, REIT income can still yield peace of mind for those creeping up on retirement age.

Also, REITs have a very low correlation with the S&P 500. That is, when the S&P zigs, REITs tend to zag, so holding REITs in your portfolio can hedge against volatility.

In this month's brand-new issue, released Thursday, Block recommends 19 REITs and four REIT-related exchange-traded funds (ETFs) that are worthy of investor consideration (you can view all his recommendations by clicking here for a free, no-risk 30-day trial). One of those ETFs is the Vanguard REIT Vipers (AMEX: VNQ  ) , which boasts a substantial (in the current environment) 3.48% yield and a measly 0.12% expense ratio. The Vanguard ETF counts historical REIT luminaries such as General Growth Properties (NYSE: GGP  ) , Host Marriott (NYSE: HMT  ) , and Vornado (NYSE: VNO  ) among its top holdings.

The Foolish bottom line
There may be a lot of fat in finance, but it doesn't take much to come up with a well-balanced portfolio. Remember: keep your eye on fees, eat the right leafy greens, and lift with the knees, not the back.

For more on EIAs, REITs, and asset allocation, kick the tires on afree one-monthtrial to Rule Your Retirement. You'll enjoy full access to everything we've ever published, and there's never an obligation to subscribe. To get started, point and clickhere.

Dayana Yochim does not own shares of any company mentioned in this article. She does own a Cosi sandwich card, and she's well on her way to a free salad. The Motley Fool has a disclosure policy.


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