Asset allocation is a lot like driving: You decide where you want to go, and then you pick the fastest route.

The destination is your financial goal, whether it’s salting away money for grad school or for retirement. The fastest route can vary, of course, but what you try to do is put your money into the riskiest asset groups you can stand (because, long-term, those are the ones making the most money). To cut down some of that risk, you diversify, putting your money in a variety of kinds of asset groups, so they won’t all plunge downward at once.

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