An investment strategy where you choose what percentage of your investment portfolio should go into stocks, bonds, or other asset classes. When you have decided on the percentage of the different asset classes, you adjust your portfolio on a regular basis to keep these percentages. How you do your asset allocation should be based on how much risk you are willing to take. The purpose of asset allocation is to get reduced risk with a diversified portfolio.
Different Asset Allocations should be considered on different stages in life. Young people would lean more into stocks, than old people that would have more of their assets in fixed income. This is based on young people are able to have a longer time horizon.