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Allocate: Putting Your Strategy Into Play

Once you determine your investment strategy, it's time to explore your investment options.

The majority of the earnings you accrue will be determined by the amounts and types of investments you choose. It may seem obvious, but how your investments are allocated really drives your long-term return.

Familiarize yourself with the historical performance of the different asset classes. Over time, stable value/money market investments have returned about 6 percent annually while more aggressive stock investments have averaged twice that return.

However, the 10 to 12 percent return you hope for from aggressive investments over the long term will not accrue evenly at 1 percent a month. If it were that simple, who would ever put money in stable value and money market investments? Be aware of the year-to-year volatility of each asset class to make sure you're choosing investments you can live with.

Important Choices
Having good mutual fund managers may help to generate returns that are higher than expected for their asset class. But you make the most important decision when you choose which asset class to invest in.

For help with asset allocation, the next section provides nine model portfolios organized by risk tolerance and time horizon. The model portfolios are intended for illustration purposes only and do not represent investment advice. Everyone has individual goals and objectives, and these can change with time. What you should strive to achieve is a blend of investments that best meets your needs — now and in the future.

Investment Time Horizon  Short-term Time Horizon