There are few pieces of parental advice better than “Don’t touch.” And the same words that prevent children from grabbing a hot stove or damaging the Mona Lisa are generally good counsel for grownups investing for retirement. That said, eventually, we do have to draw down from our IRAs and 401(k)s—and that moment may come when market conditions aren’t ideal. Which brings up an important question: What investment has the best long-term returns with the least downside in any given year? The answer: a diversified portfolio (see details in the caption at right). Over the past 20 years, owning such a mélange of stocks and bonds would have produced roughly 90% of the total return of an S&P 500 fund but with dramatically less risk in any single year. In only one year (2008) did the diversified portfolio shown lose more than a tenth of its value; the S&P did three times.