While there is no universally "right" way to invest, investors should know that individual stock selection carries more risk than relying instead on asset class allocation. Asset class allocation means investing across different classes of securities, rather than focusing on specific securities within the asset classes. It means allocating a percentage of assets respectively to equities, bonds, cash, and sometimes commodities. Because thoughtful asset class allocation spreads risk through diversification, the odds of long-term success increase when contrasted with the person who invests solely in individual securities.
