Since the odds are against your getting rich quickly or inheriting a million dollars, you will need to assess your financial situation carefully and then construct a portfolio so that you can build wealth over time. To do this, you first need to look at your time horizon.

For the short term, fixed-income investments and cash investments may have the highest potential returns. Cash, certificates of deposit, and certain bonds are typically recommended for short-term investing. For the long term, equities (stocks) have been shown to have higher historic returns than other investments. (Past performance is no guarantee of future results.) Therefore, if your time horizon spans decades, you may want to have a large percentage of stocks in your portfolio to maximize your return. Conversely, if you are investing for a time horizon of only a few months or a few years, it may be better to stash your cash in more conservative (and less volatile) investments.

When building an investment portfolio, a good tool is to keep the following considerations in mind: your current age, your immediate need for the money you are saving, and your assumed life expectancy. If you are 25 and do not need to use the money you are planning to invest in the near future, it may be wise to allocate a large portion of your investment dollars to more volatile investments such as stocks. However, if you are a 70-year-old retiree and need income for the present, more secure investments such as bonds and other fixed-income securities may be more appropriate for you.

In general, the younger you are, the more risk you can afford. As you get older, you may want to increase the percentage of fixed-income securities in your portfolio. If your investments in stocks decline during a market downturn, your life expectancy could prevent you from regaining what you have lost.