Ask Dr. Don By Don Taylor, Ph.D., CFA • Bankrate.com

Getting an early start on retirement

Dear Dr. Don,
I am 24 years old and ready to start investing for my retirement. (I am self-employed.) I understand that the best way to do this is in mutual funds. How do I go about finding an adviser/investor?
Jessica Jumpstart

Dear Jessica,
Good for you! The earlier you get started working toward a financial goal, the easier it is to reach that goal. Money set aside in your twenties for retirement has 30 or 40 years to grow.

Start out by asking yourself what it is you want this adviser to do for you. A financial planner could look at all aspects of your finances, while an investment adviser would simply recommend where you should invest these funds. Do you need help deciding between retirement plans for people who are self-employed, or are you just looking for help deciding where to invest? This Bankrate tax tip can help you choose between retirement plans.

Most retirement money is invested in financial assets and split between investments in stocks, bonds and money market securities (cash). The younger you are the more risk you can accept in your investments. That's because you have time to recoup losses and still meet your financial goals. That doesn't mean that you should be 100 percent invested in the stock market, with its high historical returns and high volatility, but it does mean that stocks should play a role in your retirement portfolio.

My rule of thumb for people starting out is to concentrate their investments in diversified mutual funds rather than diversifying investments in concentrated mutual funds. It will reduce the amount of money you spend on account fees and make it easy to manage the annual expenses of these investments. Once you build up your portfolio, you can branch out into other types of funds.

Investing in mutual funds allows your money to be professionally managed. I suggest using a no-load mutual fund to reduce the amount you spend on sales commissions (loads). This Bankrate feature discusses the different classes of mutual fund shares and the expenses associated with investing in mutual funds.

For a big-picture approach, I recommend that you hire a fee-based financial planner. A member of the National Association of Personal Financial Advisors will provide fee-based planning billed at a contracted rate.

If you're just trying to find a home for a couple of thousand dollars, then it's not worth your while to spend a few hundred dollars on hourly fees or commissions. Build up your retirement portfolio over the next few years by investing in broadly based stock index funds, bond index funds, cash or hybrid funds, which are a combination of stocks and bonds (and sometimes cash). Look for no-load funds with low annual expense ratios. Indexfunds.com provides a primer on investing in index funds.

Keep an eye on expenses because whatever you pay in annual expenses, sales loads, planning fees and account fees will reduce your portfolio's return. You're not locked in at one provider forever, so if you're unhappy with how your portfolio is managed you can vote with your feet and move the account.