The concept of asset allocation is all about investing your money in a diverse range of asset classes in order to achieve your personal finance goals. The major asset classes that form part of a person's portfolio typically include bonds, stocks and real estate.

Your personal finance plan should include a strategy for asset allocation because it can help you to increase the returns on your money while decreasing the risks. The process of asset allocation can include a number of specific tasks. This include the diversification of the asset classes so that you have bonds, stocks and real estate in different sectors, different industries and even different economies. The assets in your portfolio will grow and reduce in value, so there will also be a process of regular rebalancing your portfolio.