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The Benefits of Time Diversification
If you want to save for your retirement in 25 years, you should take similar amounts of risk for each of those 25 years so that you can diversify the risk from any one particularly bad period. What's really important are the tails that's suffering the big losses or missing the big gains. Time diversification has a lot to do with maximizing risk adjusted return over time. Vic: The most common method is something called a 60-40 portfolio allocation between stocks and bonds.