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By Adam Zoll and Christine Benz | 01-18-2013 03:00 PM

Young Investors:Playing It Safe Can Be Costly to Your Wealth

Despite skittish sentiment, younger investors can take full advantage of more aggressive, more risky asset classes, because they won't need their money anytime soon, says Morningstar's Christine Benz.

Adam Zoll: For Morningstar, I'm Adam Zoll.

Investors in their 20s, 30s, and 40s are often told how important it is to save for retirement, but many are also skittish about investing in stocks.

Here to talk about retirement savings strategies for younger investors is Christine Benz, Morningstar's director of personal finance.

Christine, thanks for being here.

Christine Benz: Adam, it's great to be here.

Zoll: Christine, many younger investors understand the importance of saving early to allow their money more time to grow, but how important is allocation within their retirement savings account?

Benz: It's really important. In fact, young investors can take full advantage of more aggressive, more risky asset classes, because they won't need their money anytime soon. So, they can ride out those inevitable ups and downs that come along with those asset classes, especially stocks, because they won't need be tapping their capital in the near future.

Zoll: So, what would be some allocation guidelines that you would recommend for a younger investor who does have that longer time horizon to invest?

Benz: I often look to the Morningstar Lifetime Allocation Indexes, which are powered by some Ibbotson research, and for people who are in very early accumulation mode, so people in their 20s maybe with their first jobs, those allocations call for portfolios that are almost entirely equities, so upwards of 90%.

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