In my most recent column, I talked about retirement accounts. Once you’ve put some money in your retirement account and brokerage account, you have to invest it.

Before we start, however, let’s go over some basic rules of investing. In general, the safer investments, like cash and government bonds, have lower returns. The riskier investments, like stocks, have higher returns. Also, the closer you are to your retirement age, the less risk you should take with your investments, such as owning more cash and bonds and fewer stocks.

The actual percentage of stocks, bonds and cash you should own, of course, depends on your specific situation.

Finally, stay away from complicated investments. If you can’t easily understand it, don’t invest in it.

Most of you probably know that owning stocks of a company means you own a part of that company, even if it’s a very small part.

Stocks, historically, have produced the highest returns among the different types of investments. That higher return, however, comes with higher risk. For most investors, I do not recommend purchasing individual stocks with the bulk of your money.

I think most investors should invest in mutual funds, and more specifically, a very low-cost type of mutual fund called an index fund. Mutual funds are essentially companies that own different stocks or bonds that are usually actively managed by a fund manager or a management team.

Index funds are mutual funds that own the same stocks as indices like the S&P 500 or the Dow Jones Industrial Average (DJIA) but are not actively managed like most mutual funds.

Index funds allow you to achieve diversification at a fraction of the cost of purchasing many individual stocks, and index funds have outperformed most actively managed mutual funds over long time periods.

Diversification is the process of owning many different stocks (preferably in index funds) so that if one or two companies crash or go bankrupt, you won’t lose your entire life savings.

Additional diversification in stocks can be achieved by purchasing index funds of large companies (S&P 500 Index), middle-size companies (S&P Mid Cap 400 Index), smaller companies (Russell 2000 Index), international companies (MSCI EAFE Index) and emerging market companies (MSCI Emerging Market Index.)

• Andy Su, MD is an emergency physician who works full-time at the Sutter Tracy Community Hospital Emergency Department and a Board Member of the Tracy Hospital Foundation.