The distribution of investments illustrates some generalities about portfolio management and how investors' asset allocations tend to change over time. Since the information presented is only intended as an example, the ideal asset allocation for any individual can vary greatly from the samples given. The sample allocations do not show contributions to tax-advantaged retirement plans. Ideally, assets in such accounts are also growing until retirement, when these investments are included as part of an overall investment plan. The way in which funds are allocated among various asset categories is the most important long-run determinant of the return on investment.
Different assets perform well during different economic periods.
For example, in the late 1970s and early 1980s, gold was a hot investment. During this period, when inflation was eroding the purchasing power of financial assets, gold was seen as an attractive physical asset to own. Since then, however, gold has generally been one of the weaker investment alternatives. Because an investor cannot perfectly anticipate when to move funds from one asset class to another, it is important to have a diversified approach to investing, one in which funds are continuously committed to a variety of assets. Changes in economic conditions and investors' perception of them affect investment performance.