For more than 25 years, academics have been debating the role that asset allocation--a portfolio's division among stocks, bonds, and cash--plays in investment results. Specific findings have varied, but there's near-universal consensus both in the academic community and among practitioners that the asset-allocation mix you choose matters a lot. A portfolio that consists entirely of cash and short-term bonds will exhibit very few fluctuations, which can provide peace of mind and may be appropriate for very short-term goals. Over time, however, it will get eaten alive by a portfolio that includes a stock component.
Specific recommendations about asset allocation will vary by advisor and financial-services company, but the basic rules of the road should hold you in good stead during your investing career.
For your long-term goals, start heavy with high-quality stocks, then gradually shift more into safer securities as your need for the money draws near. And be careful not to gorge on niche investments such as gold and emerging-markets stocks, whose returns are sometimes explosive but so is their downside potential. Diversify reasonably among the core asset classes--high-quality stocks, high-quality bonds, and cash--and you'll be OK.