Final answer:
The percentage of investments allocated to different asset classes such as stocks, bonds, and cash will not be constant over a lifetime due to changes in age, financial goals, and risk tolerance. It is false that this percentage should remain unchanged, and investors are generally advised to rebalance their portfolios over time.
Step-by-step explanation:
The statement that "The percentage of your investments that should be invested in each asset class (stocks, bonds, cash) will be constant over your lifetime" is false. Investment strategies typically need to be adjusted over time based on various factors including age, income level, financial goals, market conditions, and personal risk tolerance.
As an individual ages, the balance between risk and return often shifts towards more conservative investments. For example, younger investors may have a higher percentage of their portfolio in stocks for long-term growth, given the fact that they have a longer time horizon to recover from potential market volatility. As investors approach retirement, they commonly shift towards more bonds and cash equivalents to secure their assets and provide stable income. This strategy is aligned with the principle of reducing risk as one nears retirement.