Growing up I played a lot of 8 bit Nintendo and Sega Genesis. I was a Koopa Trooper extreme and Eldrick of Dragon Warrior was my middle name. Even with all that time spent, I was never much a console video game player. I liked the the multiplayer aspect of it. You can easily hook up a console and play with a bunch of friends in the same room. These days you can you can play 30+ man Halo tournaments on XBOX Live! They’ve come a long way with the PS3, XBOX360, and even the Wii.

My heart though belongs to PC gaming. I hated the simplicity and clunkiness of the controllers for consoles. With a keyboard and mouse combo, I had more options to choose from, a better layout for controls, and more precision for aiming. I could decimate any halo player on XBOX. Through and through I love first person shooters. I’ve spent an inordinate amount of time playing Battlefield 2 (I just became a major!).

I also love real time strategy (RTS) games. My personal favorite is Starcraft. I’ve spent countless hours defeating the Zerg threat to humanity. Actually, I’ve mostly been the Zerg threat to humanity. Can you imagine how I felt when they announced the sequel, Starcraft 2? I just about fell off my chair.

What does any of this have to do with personal finance or investing? Part of the reason that I love the game and so much more than other RTS games is that there is such a delicate balance of the resources you gather. You have to acquire and juggle three resources. The key to winning the game and defeating your opponent is asset allocation. Here’s a quick guide to allocation when it comes to real world money:

• Rule No. 1: If you need the money in the next year, it should be in an interest-bearing savings or money market account. It’s extremely hard to predict short-term movements, especially in the stock market. For instance, let’s say you own Google or Intel. You may be confident that these stalwarts are sound long-term investments. But it would be irresponsible to “invest” money in them if you’ll need that money for next month’s rent or your kid’s upcoming tuition bill. Why? Well, in the past seven years, each of these has, at some point, dipped 25% or more in a period of months. When even seemingly solid companies can drop precipitously over a short period, it’s not really investing, it’s gambling.
• Rule No. 2: If you need the money in the next one to seven years, choose safe, income-producing investments such as Treasuries, certificates of deposit (CDs), or bonds. Now, with a little more time on our hands, we’ll move slightly up the risk ladder. In order of “safest” to “still safe but technically riskier,” we have Treasury notes and bills, CDs, and corporate bonds — each providing a bit higher yield than the one before it.
• Rule No. 3: Any money you don’t need for more than seven years is a candidate for the stock market. I believe the stock market is the best choice for your long-term money, and so does Jeremy Siegel. As he explains in Stocks for the Long Run, not only have stocks easily outperformed bonds over the past 100-plus years, they’ve also beaten bonds in 80% of all rolling five-year investing periods since 1802 (i.e., 1802-1807, 1803-1808, etc.). Stocks also won in 90% of all rolling 10-year periods, and essentially 100% of all rolling 30-year periods.
• Rule No. 4: Always own stocks.
  Even if you’re at or near retirement age, stocks can help your portfolio beat the debilitating effects of inflation. Sure, at that point you’ll have plenty of short-term money in safer Treasuries or CDs. But these days, the average 55-year-old still has another quarter-century of life ahead of him or her!