Never underestimate the importance of building an investment foundation. Last week's worldwide stock market swoon is a more than ample illustration of the importance of building a foundation with your investments. Think of your investments as residing in a pyramid with three sections. The top section comprises about 10 to 20% of your total investments and consists of your riskiest holdings, perhaps high yield bond funds and speculative stocks. The middle portion may range from 20 to 30% and might include growth stocks and growth stock funds, precious metals funds, and emerging markets funds. The bottom portion of your investment period is the foundation and, depending on your appetite for investment risk, often represents one-half or more of your holdings. It is comprised of less risky securities, perhaps including blue chip stocks that pay dividends, all-in-one funds that combine several investments like target date funds, and U.S. government or high quality municipal and corporate bonds. Note that your investment foundation holdings may lose value from time to time, but because they are comprised of lower-risk investments, in bad investment markets, like we suffered last week, they should hold up better, thus better protecting your hard-earned money.    

Managing your workplace retirement plans. Here are a couple of suggestions for those who are investing in retirement plans at work.

1. The problem with most 401(k) and 403(b) plans is that the majority of choices they offer are in stock funds. When participants spread their money among the various choices, they often end up with too much money in stocks. Check where you stand. If most of your retirement savings plan money is in stock funds, you may want to move some of your holdings over to bond or stable value funds to offer some protection in the event stocks decline. After all, they have risen over 60 percent in the past 10 months, so downside risk is something to consider.    

2. My second suggestion involves target date funds, which are offered by many workplace retirement savings plans. These diversify your money according to how far away you are from retirement. The further away you are from retirement, the higher the percentage that the target date fund invests in stocks. Some long-dated target funds will invest 85 percent or more of your money in stocks. That's okay if you can stand the risk of investing most of your money in stock, particularly if you're a long way from retirement. But if you can't tolerate having so much retirement money in the stock market, rather than abandoning a target fund, simply move some or all of your money into a target date fund that is closer to the present than the one you have. The closer the date is to the present, the less money is invested in stocks. For example, if you are invested in a 2030 fund and you're uncomfortable with the losses, you can move the money into a 2020 fund or perhaps a 2015 fund. That way, you'll lower the percentage of money you've got in stocks, but you'll still have a well-diversified fund of both stocks and interest-earning securities.

Don't feel morose if you missed out on the recent stock market run up.   Many investors reduced or eliminated their stock holdings last year or earlier this year, only to miss out on the recent rebound in stock prices.  It was bad enough losing money during the stock market implosion, but now you may feel like a two time loser by remaining on the sidelines.  But before concluding that you are consigned to investment mediocrity, take some comfort in knowing that many professional investors have suffered the same fate.  There are still massive amounts of money sitting on the sidelines, so eventually more of that vast cash horde will reenter the stock market, further propelling stock prices.  The trick right now is not to conclude that it's too late.  Instead, gradually move some of your idle money back into the stock market.