Q: Some of my 401(k) investment options are labeled "aggressive growth," while others are labeled "conservative" or "moderate." Aside from the obvious definitions of these terms, what exactly does this mean, and what's best for me?

Aggressive investors are willing to take on more risk and volatility in exchange for the possibility of greater returns. On the other hand, conservative investors want lower volatility and risk, and are willing to accept lower returns.

In practice, this means that aggressive investment options tend to have higher stock allocations, while conservative ones generally have more of their assets in fixed-income or bond investments, and moderate investment options are often more of a combination of the two.

For example, one of my retirement accounts offers an "aggressive growth" portfolio, which is 93% stocks and just 7% bonds, while the "moderate growth" portfolio option has a 63% stock and 37% bond allocation. The "conservative" portfolio option is just 17% stocks, with 46% bonds and 37% cash.

Generally, the further you are from retirement, the more aggressive you should be in your investing. Stock market performance can be extremely unpredictable over periods of a few years, but over several decades, stocks tend to outperform other asset classes. Meanwhile, fixed-income investments tend to produce more consistent, but lower returns. Therefore, these investments (which are generally big components of moderate or conservative funds) can be more appropriate for investors closer to retirement.

Of course, these are just general rules, and you should take your personal circumstances into account when developing your own asset allocation strategy.