I hear a lot about asset allocation. How should I divide my money earmarked for retirement?
Asset allocation1 – or how you divide your money among asset classes like stocks, bonds, and cash – is commonly considered the most important part of investing. How you divide that money depends on a number of factors, like how long before you need the money and how much risk you’re willing to take for potential return. Generally speaking, the longer you have until you need the money, the more risk you can afford to take.