All of these are legitimate concerns. Yet, in thusly fretting away the wee hours, these investors may be rearranging deck chairs on the Titanic. For if the structural engineering of their overall investing plan is leaky, their ships may be going down, even if they were lucky or prescient enough to buy some hot securities.

This planning is called asset allocation. Simply put, this means the proportions of your liquid assets that you put into different asset classes. Unless you're a professional real estate speculator, the money you put into real estate -- i.e., your home -- isn't included in this scheme. Rather, investment allocation typically comes down to three categories: stocks, bonds and money markets (also referred to, somewhat confusingly, as "cash").

Studies have shown that asset allocation is the single greatest determinant of investment performance. Perhaps unaware of these findings, many investors blithely sink money into this and that without ever formulating, much less following, an investment-allocation plan. If they were to see a qualified financial advisor, however, they might act differently, as drawing up an asset-allocation model is the first thing many advisors recommend after getting a handle on clients' assets.

For a quick overview, click on "Top 10 things to know" at the upper left. Or work your way through "The details" sections for more information on the topics in this lesson (calculators and other interactive features are marked with a symbol). The "Glossary" section provides an online dictionary of important terms. And "Take the test" is a quiz that checks what you've learned and offers suggestions for further study.