How many times have you picked what looks like the fastest line at the grocery store, but it turns out to be the slowest? Or how often do you switch to the fast lane in a traffic jam and watch the cars in the slow lane whiz past you? You think you’re getting there faster, and then you’re wrong.
The same thing can happen with your investments. Except that when you make mistakes with your nest egg, if it’s too big a mistake, it can be disastrous.
Here’s a simple lesson: What goes up will come down! And, No matter how smart you are in the investment world, you will, at some point, be wrong. So it’s critical that you have a plan in place so you’re protected no matter what.
Asset allocation is the most important investment decision of your lifetime, more important than any single investment you’re going to make in stocks, bonds, real estate, or anything else. So what is it?
Asset allocation offers you a set of guiding principles, a philosophy of investing to help you decide where to put your nest egg and in what proportions. It’s is more than diversification. It means dividing up your money among different types of investments (such as stocks, bonds, commodities, or real estate) and in specific proportions that you decide in advance, according to your goals or needs, risk tolerance, and stage of life.
Think of it as taking chunks of your money and putting them into two separate investment buckets, each with different levels of risk and reward. The first of the two buckets is a safe environment for your money, and the second bucket gives you much quicker growth – but it’s riskier.
Click here to discover what Tony has to say about the most important investment decision: