Ultimately, you want to build a well-diversified, properly allocated portfolio that will help you achieve enough return to reach your goals, while not taking so much risk that you panic in a downturn and make the wrong decision(s) a the wrong time.
You should figure out what an appropriate asset allocation (i.e. the ratio of stocks to bonds in your portfolio) is for your situation. The higher the exposure to stocks, the more risk and volatility your portfolio will have, but in theory, the higher your long-term returns will be. The lower the exposure to stocks, the lower your long-term returns will be, but the less risk there will be, which means that your declines in a down market should be less severe...again, in theory.
Once you have determined a good asset allocation, you should look to create a portfolio that provides exposure to stocks (both domestic and foreign), bonds (both domestic and foreign; and also federal government, municipal, and corporate), real estate, commodities, precious metals, etc.
Then you need to periodically review the account to make sure that it has not become too aggressive or too conservative. If it has, you will want to rebalance the account so that it is back to your target allocation.
Spending a few hours with a fee-only financial planner on the front end may help, because s/he can review your overall financial situation and work on determining what a good asset allocation would be and then suggest some funds to build a well-diversified portfolio. It may cost a few hundred dollar (most fee-only planners charge between $175 and $300 per hour), but it could be money well spend if it helps you get off on the right foot.
Hope this helps some, and best of luck.
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