Have you seen the news lately? Doom and gloom. The housing market is in a meltdown. New record lows in sales, record highs in inventory... Everyone's concerned. What does it mean? Where will it lead? When will it end?

And maybe most importantly, where should I put my money?

My answer to the question, "What should I invest in now?" never changes. My answer always remains "Invest primarily in stocks, secondarily in bonds". You need both. You always need both if you want the best return on your money with the least amount of risk.

Now the super aggressive reader here might be saying to himself that 100% stocks is the way to go. There is no question that to get 100% of the potential return on an investment in stocks you should invest 100% in stocks. Consider, however, that by mixing in a small percentage of bonds an investor can lay off 20% or more of his risk while retaining 90% or more of his return potential.

For the ultra conservative investor the reality of risk versus reward in portfolio allocation is usually a surprising revelation. The most conservative - meaning least risky - investment strategy involves adding a small amount of stocks to what is primarily a portfolio of bonds. It's true: a portfolio consisting of 100% bonds is more risky and returns less than a portfolio with mostly bonds and a small number of stocks.

Why is this, you ask? Diversification. Stocks and bonds tend to move in different directions. They seldom move in tandem. Investing in a mix of stocks and bonds helps insulate your portfolio from market volatility.

What should you invest in now? To get the best return on my money, I go with a mix of stocks and bonds. Heavy on the stocks, the rest in bonds. By doing this, I get the best return for the risk taken on.