Do you think it is important to select the correct stock while allocating assets? Rather than exact securities selections, it is not important in long term. The target essence of this topic, research suggests that securities selection is not the most important determinant of portfolio value in the long term, But Asset allocation is important to return in the long term which means how much we are going to allot with different asset classes. For example, the stock is one asset class. So how we split our investment across the different asset classes is more important. For example, if we have 20 lakh rupees to invest, how much we will allocate in stock, bonds, money market? So we have to find why asset allocation is important as compared to an individual stock. Let’s take an example of a stock market trend, which is an upward trend in long term. We may want to enter at a low in the trend but most of the time we are not successful. The timing of the market is not a good thing to purchase a stock. In such a system, the better approach will be to do asset allocation properly and then we should do a Systematic Investment plan(SIP). We are buying something every month instead of buying the stock at low and exiting high. So while buying using SIP our price will average, and our cost will be average. In SIP in some cases we buy low and in some cases, we will buy high, so there is an average. So Asset Allocation is how much we can invest to allocate assets, and bonds both domestically and globally. For example, asset allocation can be stock, bond, or money market, in case globally, we can look for country-wise or geography where to invest. In the case of bonds, it will pay coupons at the end of the year. For each class the return and risk are similar. For example, Stock has a high risk, bond is a lesser risk, and money market is a low risk. Asset allocation delivers 80% of the return based on empirical research. There are 2 types of investors a) Individual investors and b) Institutional investors. Before taking an asset allocation decision first we have to understand the Life cycle Phases of networth earning and Accumulation Phase, Consolidation Phase, and Spending Phase. Before starting an individual investor lifecycle, some of the basic financial plans are Life Insurance which includes Term Life Insurance for the whole life, and Non-Life Insurance which is Health Insurance. The other types of Insurance like home insurance, and auto insurance. There was a cash reserve for survivals also in case when there is no job, we should be able to survive for 6 months. Then we should think of financial planning later and the lifecycle phase can come into the picture.