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money into different investments in different amounts is known as asset
The amount you invest in any particular kind of asset depends on
your time horizon for retirement.
In the short term, cash, certificates of deposit and bonds have
more dependable returns and the lowest volatility. But along with lower risk
comes lower returns. In the long term, equities such as stocks generally have
higher returns than other investments. So if you are 30 and have a long time
until retirement, you might want to put a large percentage of your investments
in stocks. If you are about to retire, you might want to start investing more in
bonds and CDs.
The way you
allocate your investments also depends on your risk tolerance—in other
words, how much of your investment you can afford to lose.
If you have a high tolerance for risk, you are more likely to
invest in more volatile investments such as stocks, regardless of your age.
You might also want to reallocate some of your investments upon
reaching retirement. For example, you could keep the majority of your
investments in long-term, higher-risk assets but move some of your money into
short-term, low-risk assets to generate monthly income and decrease
You will also have to consider tax implications in any
decisions you make about where to invest your retirement