Asset Allocation is a strategy that aims to balance risk and reward by splitting the investment portfolio in different asset classes according to an individual’s goals, risk tolerance and investment horizon.
It is the only non-derivative technique wherein we can reduce risk (lower overall portfolio volatility) and get better returns.
It is one of the most important factors which affect your investment returns. This has been researched and proven time and time again. Asset allocation is more important than market timing and more important than individual security selection.