Final answer:
Asset allocation decisions should take into account your life stage, risk tolerance, and future economic expectations, but not past economic conditions as they are sunk costs. Your investment risk level will evolve over time, generally being higher when you're younger. Diversification is crucial but doesn't guarantee success.
Step-by-step explanation:
Your asset allocation decision should not consider D) past economic conditions. This is because past economic conditions are considered sunk costs, which are past expenses that cannot be recovered and should not impact current decision-making. In contrast, your asset allocation should be influenced by factors such as your stage in life, your degree of risk tolerance, and your expectations of future economic conditions.
Throughout your life, your investment risk level will likely change. During the early part of your career, you may have a higher risk tolerance because you have more time to recover from potential losses. As you approach retirement, you're likely to shift towards more conservative investments.
It is also important to recognize that while a diversified savings and investing portfolio may help manage and spread out risk, it does not ensure economic success, as there are many variables at play in financial markets and personal finance.