Choosing the right mixture of different asset types -- stocks, bonds and cash investments -- is called asset allocation, and it is an absolutely critical part of investing. A wise asset allocation strategy will make the difference between a legitimate investment plan and just a bunch of investments.

Researchers have surveyed the retirement planning industry to find out what factors most influence the investment performance of pension funds. Overwhelmingly, the leading factor is strategic asset allocation (the mix of assets). It is responsible for 91.5% of pension funds' performance. Other factors such as market timing (trying to buy low and sell high) and choosing individual securities account for only 8.5% of pension funds' results.

In other words, buying a wide range of stocks and bonds as a long-term investment is more important than trying to cash in on momentary market mania. Market events make great news, but usually they don't make much difference over the long term. Some people do get rich by playing the market -- but those people are almost always professional investors and their success stories are few and far between.

• What Is the Asset Allocation Process?
  How to use strategy in choosing your investments.
• Finding the Right Ingredients for the Pie
  Make sure your funds invest the way they say they invest.
• Why No Single Investment Has It All
  No matter how strong a stock is, it will have off periods.
  Be prepared.
• Correlation: How to Get Out of Sync
  Hedging techniques from the pros.
• Is There An Ideal Asset Allocation?
  An efficient portfolio will give you your money's worth -- the right balance of risk and reward.
• Optimizers: What Can They Do?
  Sophisticated programs that do complicated math.

Choosing the right mixture of different asset types -- stocks, bonds and cash investments -- is called asset allocation, and it is an absolutely critical part of investing. A wise asset allocation strategy will make the difference between a legitimate investment plan and just a bunch of investments.

Researchers have surveyed the retirement planning industry to find out what factors most influence the investment performance of pension funds. Overwhelmingly, the leading factor is strategic asset allocation (the mix of assets). It is responsible for 91.5% of pension funds' performance. Other factors such as market timing (trying to buy low and sell high) and choosing individual securities account for only 8.5% of pension funds' results.

In other words, buying a wide range of stocks and bonds as a long-term investment is more important than trying to cash in on momentary market mania. Market events make great news, but usually they don't make much difference over the long term. Some people do get rich by playing the market -- but those people are almost always professional investors and their success stories are few and far between.

• What Is the Asset Allocation Process?
  How to use strategy in choosing your investments.
• Finding the Right Ingredients for the Pie
  Make sure your funds invest the way they say they invest.
• Why No Single Investment Has It All
  No matter how strong a stock is, it will have off periods.
  Be prepared.
• Correlation: How to Get Out of Sync
  Hedging techniques from the pros.
• Is There An Ideal Asset Allocation?
  An efficient portfolio will give you your money's worth -- the right balance of risk and reward.
• Optimizers: What Can They Do?
  Sophisticated programs that do complicated math.