Every day, we face tough financial choices: Spend or save? Bet on the high-flier or go for the sure thing? Invest everything right away or buy slowly over 12 months?

These might seem like tricky decisions - until, that is, you think through the possible consequences.

Take a basic choice that all investors make: You can spend your days trading in and out of big investment bets or you can settle down with a diversified portfolio.

The fact is, if you save regularly and own a diversified portfolio, you have an excellent shot at retiring in comfort. But if you roll the dice, retirement could be a grim affair.

True, your big investment bets could pay off handsomely. That's unlikely, however. The most an investment can lose is 100%, but its potential gain is 200%, 300% or more. Indeed, most years, the market averages are driven upward by a minority of stocks that post spectacular gains. These big winners enthrall investors, who are then tempted to abondon their boring, diversified portfolios.

But if they do that, they will likely be disappointed. Because the market averages are propelled higher each year by a select group of big winners, a majority of stocks suffer below-average performance - and these are the stocks that our dice-rolling investors will probably end up owning.

To a lesser degree, the same issue arises when choosing between actively managed stock funds and index funds. An index fund replicates the performance of its target index, while an actively managed fund offers the chance to earn market-bearing returns.

That chance, however, brings with it the risk of failure. Standard & Poor's, a unit of McGraw-Hill, regularly analyzes stock funds in nine "style boxes," such as large-company growth funds and midsize value funds. Result: Over the past five years, between 59% and 89% of actively managed funds underperformed their benchmark index, depending on which style box you look at.

To be sure, if you buy actively managed stock funds you probably won't fail as badly as those who make big bets on a single sector or a few stocks. Still, there's a risk of lagging far behind the market averages, something index-fund owners don't have to worry about.

If you have a large sum to invest in stocks, you could buy right away or you could spoon your money into the market over, say, 12 months. Stocks rise most years, so investing immediately should earn you the higher return. Trouble is, that also increases risk. What if you invest everything and the market promptly plunges 20%? If you are dealing with a large sum, the loss could be devastating. That potential hit will, for most folks, loom far larger than any potential gain.

Admittedly, you could invest gradualy over 12 months and then get whacked with a 20% decline. But presumably you would have clocked some gains over the initial 12 months, so the overall hit to your wealth wouldn't be quite so punishing.

Lately, there's been some debate over whether Americans are saving too much for retirement. Even if you find the studies involved convincing - which I don't - it still makes sens to err on the side of caution and sock away a healthy sum each month. After all, if you later discover you have saved too much, you can always spend more or retire earlier. But if you find you haven't saved enough, you may have to continue working long after age 65.

Frankly, it's hard to imagine many folks will reach retirement and find they have too big a nest egg. You could get hit by inflation or rotten markets, and you might live longer than expected. The best way to protect yourself is to save during your working years and amass a good size portfolio.

With irritating regularity, I advocate that retirees rely on their savings during their initial retirement years, meanwhile delaying Social Security retirement benefits so they get a larger monthly check. I often also suggest that seniors sink maybe a quarter of their savings into an immediate fixed annuity that pays lifetime income.

Once again, it's all about consequences. If you ignore my suggestions and you die before age 80, you will likely have made the right choice. You won't have wasted money on the annuity, you will have collected a fair amount from Social Security before your death andm as a result, you will have a fatter portfolio. This is good news for your heirs.