Psst. want a hot stock tip? Your dream, of course, is to get in early on the next eBay or Google. But if you want a tip that will withstand the test of time, ignore the buzz. For the most part, it doesn't matter much which stocks or mutual funds you buy. What really counts is asset allocation, or how you divide your money among a diverse menu of investments. Sure, you may think you're diversified. You've got a big chunk of your money—probably about 60% to 70%—in U.S. stocks, perhaps a mutual fund tracking the Standard & Poor's 500-stock index. Another 25% to 30% is in bonds, most likely rock-solid U.S. government bonds. That's so-o-o 20th century. With returns on U.S. stocks in low gear and yields on the 10-year Treasury note about 4%, the flaws of such a plan are obvious. What you need for the 21st century is a more diverse set of investments. Thanks to a proliferation of new products, you can build a sophisticated, well-diversified portfolio on a scale that wasn't possible even five years ago.
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