Asset Allocation
To build a portfolio that balances risk and reward, your portfolio should divide up your assets according to your goals, time horizon, and tolerance for risk. The proper allocation of assets is the single most important principle of successful investing. Believe it or not, it is even more important than the individual mutual funds, stocks, or bonds in your portfolio.
Diversification is the key to minimizing losses during declines in the stock market. Spreading your assets across multiple categories will yield returns at considerably less risk. In addition, maintaining the proper allocation of assets ensures that your portfolio remains focused on your long-term objectives.