Asset allocation is the process of deciding how to divide your investment across several asset categories. Stocks, bonds, Mutual funds, other debt instruments and cash or cash alternatives are the most common components of an asset allocation strategy. Asset allocation means diversifying your portfolio.
In simple words invest your money in different types of an investment product to minimize your risk and maximize the returns. The asset class can be equity, debt, real estate and gold. Asset Allocation depends upon your age, risk-taking ability and time horizon for the particular goal.