Asset allocation for young investors

Here is the article.

Why asset allocation matters

The goal of asset allocation is to get a return on your money while managing risk.

There will, of course, always be market risk—the risk that an entire market will decline. We saw a good example of market risk from the fall of 2008 to the spring of 2009. Every asset class declined across the board. Stocks, bonds, mutual funds, and real estate all took a nose dive. Money market funds—considered the safest of safe investments—even lost money. The bottom line is you can’t eliminate risk entirely. (And leaving your money is a savings account isn’t the answer. Over time, inflation will outpace the measly interest rates savings accounts offer and leave you with a negative return on your money.)

The good news is that with smart asset allocation, you can reduce some investing risks, specifically unsystematic risk (the risk that lies within one particular investment).

Investing in any individual stock or bond leaves you vulnerable to the risk that the particular investment could go down in value. Diversification eliminates this risk and gives you the opportunity to make money with one asset class even while another declines.