If you're reading this, you probably own stocks, either directly or via mutual funds. You might also own some bonds, and maybe have some cash in a money-market fund.

Lately, you've probably also put some thought into your asset allocation. If you haven't yet been clued in, the concept behind asset allocation is pretty simple: Different classes of assets -- like stocks, bonds, and money market funds -- behave in different ways over time.

By spreading your money around among different kinds of investments -- allocating your assets -- you can cushion your exposure to shocks in different corners of the market. Done right, this reduces your risk more than it reduces your return, which (as long as your return is adequate for your needs) is a good trade-off.

Most of us are on board with that, at least in our retirement accounts. Maybe you own some U.S. large-cap stocks, some small caps, some international stocks, and some bonds. Together with a cash reserve, balanced in a way that makes sense for your goals and your investing time horizon, that's most people's idea of sound asset allocation.

Too bad most people are missing a few things, including the one must-have investment they should probably be building their whole allocation around.

The missing pieces of pie
Before we get to that must-have investment, here are a couple of points to get you thinking a little differently about asset allocation:

  • Everything counts. Not everything that's in your retirement portfolio shows up on your quarterly 401(k) statement. Are you planning to sell that four-bed three-bath neo-Colonial once the kids are gone and move to something smaller? If so, isn't your house part of your retirement fund? Think about the risks and rewards of your house (and your other big assets) as an investment, and how that fits into your overall portfolio strategy.
  • The company-stock blunder. I have friends and/or family members who work at Akamai (NASDAQ:AKAM), Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), and Art Technology Group (NASDAQ:ARTG), among others. All of them have various ways of acquiring company stock, whether via employee stock options, employee stock purchase programs, or 401(k) options. At different times during the last 10 years, each of those stocks has been a gotta-have high-flying market star, making it very tempting for employees to overload their portfolios with their employer's stock. If you look at the 10-year charts on those stocks, you'll see that that has worked out better for some folks than for others. (And if you're still not sure, ask an Enron veteran.) Don't ever put too many of your eggs in one basket, even if it's a very familiar basket.

The company-stock thing brings to mind another point. Consider: Even if you don't own a single share of your company's stock, your financial future is already heavily exposed to the risks of your employer's business. How so?

That exposure comes from you. Yes, you!

You -- specifically, the income you earn every day and will continue to generate in the future -- are the gotta-have asset you should consider building your entire asset allocation around. And while that might require a different way of thinking about asset allocation, it's worth serious consideration on your part.

Start with yourself
In the new issue of the Fool's Rule Your Retirement newsletter, available online at 4 p.m. ET today, lead advisor Robert Brokamp walks through the ways in which you're an asset -- and how to incorporate yourself-as-asset into your overall retirement savings strategy.

Some of it is obvious, once you start thinking along these lines. For instance, if you work for Google, you probably shouldn't have huge positions in Yahoo! (NASDAQ:YHOO) and Baidu.com (NASDAQ:BIDU), because you're already heavily exposed to the ups and downs of that corner of the Internet through your job.

But some of it is more subtle. For instance, I have a friend who is a freelance editor. Sometimes she's really busy, and sometimes things are fairly slow. Over the long term she does very well, but her income varies quite a bit from month to month. Compare that to another friend, a tenured college professor -- he'll be employed for life, if he likes, with a very stable and predictable income. Should the editor be taking less risk in her retirement portfolio than the college professor, to compensate for the vagaries of her job? What about other aspects of her financial life?

There's a lot to think about, and these are important questions. If you'd like to read Robert's full article, which looks at these questions in much more detail, help yourself to a complimentary one-month guest pass to Rule Your Retirement. The pass will give you full access to the most recent issue, all back issues, our special members-only discussion board for your questions and ideas, and a unique set of planning tools to help you create your own plan for retirement. It's yours for 30 days, with no obligation to subscribe.