Over the last year, I've discussed many different strategies that you can use to build a solid financial future. First, I helped you determine how much money you'll need at retirement. Then I talked about ways of saving just a little more each month and how much a difference that little would make to the bottom line. Finally, I looked at the range of places you could invest that money.

This month, in my final column of the Financial Planning for Scientists series, I'm going to outline ways that you can pull all this information together to create one big investment strategy. Experts have a technical term for this practice--portfolio diversification--but the old adage "don't put all your eggs into one basket" neatly summarizes the general principle. The idea is to use all of the investment opportunities at your disposal, while at the same time figuring out how much money to put in each opportunity to minimize overall risk.

Portfolio diversification is analogous in many ways to the strategy taken when designing a series of experiments for a Ph.D. thesis. If you were to do one experiment at a time, waiting for the outcome of that experiment before designing or moving on to the next, it would probably take about 20 years to get a Ph.D. Instead, a well-designed experimental strategy asks several different questions (or asks the same question in several different ways), with many of the experiments running concurrently. If one of the experiments works, it wouldn't be so bad if most of the others fail. Portfolio diversification looks at the sum total of all your investments and makes sure they're adequately spread out over different industries, different investment types (e.g., stocks versus bonds), and sometimes even different countries. Like the Ph.D. strategy, it's all about minimizing risk as much as possible to make sure that there's something of value there when you need it.

Another way that portfolio diversification is akin to experimental design is that your diversification strategy will necessarily change over time. The beginning of a Ph.D. is often the best time to do those crazy, high-risk experiments that, if successful, will land you a paper in Science. But by the time you're getting toward the end of your Ph.D., you're more likely to be thinking along the lines of "what's the bare minimum I need to do to graduate?" And the chances are that you'll be focusing on the safest experiments--those that aren't as glorious but that have a better chance of succeeding. The data from these experiments are often still publishable, but in less prestigious journals. A similar process occurs in designing your portfolio: You can follow riskier but potentially high-return investment strategies early on in your career, because this is when you can afford to take them. But by the middle of your career, you should be asking: "How much do I really need to retire?" before figuring out the safest strategy to get to that place.

A typical "early career" diversification strategy will be 50% to 75% equity, 20% to 30% bonds and other fixed income, up to 10% cash, and 5% to 10% real estate, usually in the form of shares in a Real Estate Investment Trust. As your career matures and you get closer to retirement, the amount of equity should decrease, with a proportional increase in bonds.

The first step in building a diversified portfolio is to take a look at all of your investments, including those that you control and those--like employer plans--that are "forced" upon you. Start by placing your investments into three categories: investments that are in the control of someone else (i.e., your pension plans and/or stock options), investments that are in the your control (i.e., stocks and bonds that you own), and investments you've chosen to put in someone else's hands (i.e., mutual funds).

Then look at the investments that are in someone else's control. Find out what percentage of your pension plan is in equity, and how much is in bonds or cash. Treat stock option plans as equity. Next add the mutual funds you've bought--you'll be able to see what percentage of those are stock and what percentage are bonds in the annual report they send you. Your "self-directed" investments make up the rest.

Once you've figured out the percentage you have of each, think about how aggressive you want your portfolio to be. If you're early in your career, you'll want to be more aggressive (and therefore own more stocks and fewer bonds).

Doing this quick overall portfolio check every year or so is a very good idea, for two reasons. First, your "position in life" will be changing as you get older. Second, as your stocks do well (or don't ...), the percentage of investment dollars in that category will change significantly relative to your bond portfolio, which won't change in value as dramatically.

Remember that there are many different ways of diversifying--you might also want to diversify across different countries (to protect against the risk of a single country not doing so well) or across different industries (to avoid industry-specific meltdowns). And please keep in mind that the diversification percentages I've offered here are only guidelines--depending on your investment needs, you'll probably want to modify them based on what we've learned over the last year and on your own particular situation.

Well, that's it for the series, but by no means for the learning you need to do to effect a winning investment strategy. The series was meant to provide a glimpse into the world of personal finance and, like anything else in life, the success you have in building your financial future will correlate directly with the amount of time and energy you put into it. So good luck!