Of all the decisions you must make with respect to your retirement money, how to invest it will probably cause you the greatest anxiety. Questions are abundant. First, let's discuss why asset allocation is so important to wise investing. Stocks, bonds, and cash each have their own risk and growth characteristics. Stocks may provide the greatest growth potential, but they also have the highest risk of decline in share price.
Bonds are less volatile than stocks and generate income.
However, their market value may decline when interest rates rise. Cash may provide you modest income and maintain a stable price but has no growth potential. By mixing all three asset classes, you reduce risk, preserve profits, and improve your total return over time. Determining the right mix for your portfolio is based on your age, the number of years until your retirement, and how much risk you can tolerate. The younger you are, the longer your investment time horizon and the stronger the case for investing in stocks.