So how does all this come together in the form of an actual asset allocation? Below are three model portfolios you can use as a starting point for cooking your own investment soup, followed by descriptions of the asset classes. (Note: We did not include cash in these allocations. We're assuming you have the money you need in the next year, as well as an emergency fund, already sitting safely in a money market account or similar investment.)

We've used five broad categories that could serve as the foundation of your portfolio. The categories can be further sliced and diced; in fact, the Model Portfolios we discuss in Rule Your Retirement feature 12 different asset classes. But these five will set you firmly on the path to a well-diversified nest egg. We've also thrown in a representative exchange-traded fund (ETF) for each asset class, so you can get an idea of what kinds of investments fall under each category, as well as a cheap and easy way to implement this core portfolio:

Asset class

ETF

Conservative

Moderate

Aggressive

Large-cap U.S. stocks

SPDR (AMEX: SPY)

20%

30%

40%

Small-cap U.S. stocks

iShares S&P 600 (AMEX: IJR)

5%

10%

20%

Foreign stocks

iShares MSCI EAFE (AMEX: EFA)

5%

10%

20%

REITs

SPDR DJ Wilshire REIT (AMEX: RWR)

10%

10%

5%

Bonds

iShares Lehman Brothers Aggregate Bond (AMEX: AGG)

60%

40%

15%

An allocation adieu
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