Young investors usually have not accrued a lot of wealth and also have many working years ahead of them. Assuming they maintain employment, they can expect a steady income and may take more risk in holding stocks (equities) because they have more time to recover if their holdings perform poorly. 

But as investors approach retirement, they will begin shifting their portfolios to less-volatile, income-producing assets, such as high-quality bonds or certificates of deposit. The Morningstar Investing Classroom provides further guidance on this topic.

There's no guarantee that one asset mix will perform better than another, but investors who take on more risk early often can obtain higher returns over time. One can reasonably expect stocks, which have the most risk, to generate more income than bonds over the long term, and bonds to have higher returns than CDs, which are low-risk investment vehicles.

How long is "long term"? As the last 10 years have demonstrated, equities can go through prolonged periods of flat or down performance, especially if investors enter the stock market at a lofty peak (such as during the tech bubble). But dollar-cost averaging into the market over time can mitigate the effects of poor timing by spreading out your investments.

Investors who practice strategic asset allocation seek to create a sensible stock/bond/cash mix while they're young and then gradually shift their portfolios more into bonds and cash as they become older. By maintaining a fairly stable strategic asset allocation plan, investors can keep their portfolios diversified while slowly lowering their risk profile over time. Therefore, a strategic asset allocator will make changes to his or her portfolio only if allocations shift heavily from the targets (due to market swings), or when the targets themselves change as the investor ages.

As outlined in the related video below, other investors choose to take a more hands-on, or tactical, approach to allocation in order to be more opportunistic in the market.

Before determining your target asset allocation, take a look at where your holdings currently stand and any recent activity. Morningstar's Instant X-Ray tool is a handy way to see how much of your portfolio is devoted to stocks, bonds, cash, and other assets. You can also see stock sector and regional breakdowns as well as investment style.

If you're new to the investing world, this article offers tips to get you headed in the right direction.

Additionally, you can gain more insight into how much weight you give assets in your portfolio by answering these simple questions:

Are you expecting other sources of income during retirement, such as a pension?
Yes: You may consider tilting to more equities
No: You may consider tilting to fewer equities

Does longevity run in your family?
Yes: You may consider tilting to more equities
No: You may consider tilting to fewer equities

Click here to see additional questions.