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If you have a 401k retirement savings plan, chances are you dabble in the stock market. Everyone, especially those with years before retirement, are encouraged to give stocks a shot. There is a good chance that it will be a big payoff in the end.

Although stocks are a good way to generate money for retirement, there are some risks involved. In 2008, the stock market and the entire American economy took a hit. Many Americans were helpless as they watched their retirement savings decrease. That is part of the risk. That is why those nearing retirement, such as within the next five years, should avoid risky investments and start making the switch to low-risk options, such as bonds.

With that said, if you are young or looking for a big payoff, now is the time to get started. To avoid losing your retirement savings, as some Americans did, proceed with caution. It is important to diversify your stocks. For example, also in 2007 and 2008, the auto history took a huge hit. They closed plants, reduced car production, laid off workers, and even asked the government for financial help. If most of your stocks were related to the auto industry, you lost a lot of money. If you diversified your stocks and had some from financial institutions, technology companies, and the food industry, your loss was less because you diversified your stocks.