I remember as a kid my dad used to say, “Jason, don’t put all your eggs in one basket.” I didn’t realize it at the time, but he was talking about diversification. Diversifying your investments in retirement is a different ballgame than while you’re in the accumulation phase. Retirement diversification really requires two levels: first across your time horizon, and second across investments for each time segment. Retirement really is all about cash flow as your income is what allows you to do the things you want to do. Preparing for retirement requires having a strategy for generating a lifetime of inflation adjusted income.

The money you invest in the stock market is to help you outpace inflation so you don’t lose purchasing power over a long period of time. I believe the two primary ways you can intelligently invest your money in the stock market are through Modern Portfolio Theory & Tactical Investment Management. The first is what I call the “science of investing,” which is built upon Modern Portfolio Theory (MPT) and the Efficient Market Hypothesis. William Sharp and Harry Markowitz won the 1990 Nobel Prize in economics for developing this theory. This theory asserts that markets are efficient, provides guidance for how risk assets should be priced and proposes a way for rational investors to diversify their investments and participate in these efficiencies. Essentially the key with this theory is broad diversity across the entire globe, across asset classes and sectors, and to rebalance your portfolio as necessary to maintain your asset allocation over time. This method has a long list of academic research behind it to back it up.
However, some behavioral economists are critical of MPT and the Efficient Market Hypothesis. They argue that humans are emotional in nature and engage in often irrational decision making. They point out that this method didn’t hold up very well in the market crash of 2008 when fear was the driving force for investment decision making. 
So if the “science of investing” has some holes in it what are the other options? An alternative to MPT is Tactical Investment Management. Tactical investment management means different things to different people, but usually involves someone actively managing your retirement funds. When hiring a tactical investment money management firm, you should look for managers who are seeking opportunities to avoid or reduce risk by actively trading and managing a portfolio. I call this type of investment management the “art of investing.” This management style cannot be academically proven, however many tactical money managers have had an impressive long-term track record of helping to reduce stock market volatility and provide attractive returns. The emphasis of this strategy is usually geared toward preserving principal and outpacing inflation than trying to beat the returns of the markets.    
There are no magic bullets when it comes to investing in the stock market. And you can make a strong argument for the “science of investing,” or the “art of investing.” I often recommend employing both types of investment management in your overall retirement strategy. As I have said many times “I’d rather be right 50% of the time than wrong 100% of the time.”
How you choose to invest your money in retirement is a highly personal and a very important decision. If you make a mistake at this period of your life, you may not have enough time on your side to make up for any sustained losses, especially if you need your money to supplement your income in retirement. Investing doesn’t have to be complicated, just remember to buy low and sell high.