Asset Allocation

Written by Jessica Duquette
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Asset allocation is crucial to a successful portfolio. Simply stated, the best way to allocate your assets is by not putting all your money in the same types of investments. Since there is risk in any investment, it's safer to distribute your money in an array of investments rather than putting every penny you own into one place.

Don't Put All Your Eggs in One Basket

You may be young and single and making a lot of money in the stock market. In fact, for many people in 2000, they were experiencing a life very similar to this. With the stock market on the rise, people were dumping money in stocks and seeing tremendous returns.

Since the market was doing so well, people put less importance on asset allocation. Well, all good things come to an end, and so did the market. Many people who had put the majority of their money in the stock market soon realized losses as big, if not bigger than, their 2000 gains. Had they distributed the money in different areas, the blow to their portfolio may not have been so drastic.

Gambling = Risk

Gambling in the stock market is always a risky endeavor. If you're looking for some more stable investments to counter the risk, take some of your earnings and invest in a bond or two. By applying asset allocation to your portfolio you're sure to experience a more positive return in the long run.

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