Diversifying IRA's

[Ragnar Hogbrok]

I started my Roth IRA in 2005, at age 23, and currently have only one vehicle for growth, which is an American Funds mutual fund.  I haven't been able to contribute to it as much as I would like to the past few years.  Due to the long time I have to invest before tapping into my Roth, my question is this:

Since I am now able to contribute more money to my Roth IRA than in the past, should I continue to pump money into the existing mutual fund?  Or should I diversify the IRA's portfolio by foraying into individual stocks, money markets, CD's, etc?  I know that diversifying is almost always the preferred course of action, but is a mutual fund diverse enough (mine seems to dabble into all markets, including foreign markets) to provide earnest growth without the risk of losing money?  Thanks for your help, guys.

[ConwayHog]

I knew an older gentlemen who was a retired anethesiologist and used three different financial advisors.  Talking about the ultimate diversification.  He said he didn't want to be left without anything if he received bad advice. 

My personal opinion is to stay away from CD's as a method of growing your retirement account.  Pretty much the same with money markets.  I use a money market account for my savings/emergency fund.  My 401(k) is filled with about 7 or 8 different mutual funds.  It doesn't mean it's THE way to go.  It's just what I use and I'm young like you.  My goal is to begin a Roth IRA at some point.

[Section B]

You have to be careful about holding multiple mutual funds, in that, I've known many people who hold multiple mutuals without realizing that the holdings overlap, so that they really aren't diversified like they think.

In other words, don't hold three mutuals with each holding Exxon, Wal-Mart, Etc etc. Just be sure and compare holdings before buying.

Also, if you think the stock markets will continue to go up long-term, then index funds are an easy, low cost, low effort way tap into this growth. 

It's often been said that the easiest way to become a millionaire is to steadiliy invest in ONE well-balanced fund (such as a mid-cap index fund), dollar cost average, and hold it for years and years, especially if you start young.  It isn't flashy, but it is effective.

[SultanofSwine]

Diversification can be viewed in few different manners for example, types of assets ie: mutual funds, stocks, bonds, etc. or asset classes ie: lg cap growth, mid cap value, global bond, etc.