Taking a vacation this fall? How much time did you spend poring over travel sites on the Internet or talking to a travel agent? Would you say you spent as much time choosing your asset allocation?

Deciding how much money to invest in each of the major asset classes — stocks, bonds, and cash — may be one of the most important investment decisions you make. Selecting the right mix of investments to fit your objectives, time frame, and risk tolerance can have a big impact on whether or not you reach all your financial goals.

Kick Back and Relax

If you’re a long-term investor with several years until you’ll need your money, you may want to devote a large percentage of your portfolio to equity investments. Even investors who’ll need their money sooner should consider putting some money in stocks.¹ Stocks offer the greatest potential for long-term growth and, historically, have generally outperformed other investment types. Selecting a mix of stock types, such as foreign, and large-, mid-, and small-cap stocks, will help diversify your portfolio.

Explore New Places

No investment type is going to perform well all the time, so spreading your money among different asset classes may help cushion your portfolio against major losses.Fixed-income² investment values often move in the opposite direction of stock values. Consider holding a mix of short-, medium-, and long-term bonds.

Plan for Rain

Cash investments, such as Treasury bills and certificates of deposit, help you save for short-term goals and can easily be converted to cash in an emergency. Note, though, that rates of return on cash investments are typically low and may not keep pace with inflation.

1 Stock investing involves a high degree of risk. Stock prices fluctuate and investors may lose money.