If you invest in the best equity mutual fund and equity market as a whole crashes, your selected product cannot beat the market. Therefore right asset class allocation defines your return and not the product selection.

Asset allocation is essentially an investment strategy to stabilize risks and returns by choosing investment instruments according to your financial goals, risk tolerance and time horizon. Asset classes have different levels of risk and return variability. Each asset class may perform differently over time. Successful asset allocation requires finding the proper mix of assets to balance reward with an acceptable level of risk.

Asset allocation is critical for long-term investing and financial planning as it can help absorb the impact of market fluctuations and balance your tolerance for risk.  A downside of a specific asset class is usually neutralised by an upside of another asset class. This way you can enjoy the upside and de-risk the downside to a great extent.

Prudent asset allocation can help you ride out the ups and downs of long-term market performance. No single asset class will outperform another consistently and no single asset allocation strategy may be right for everyone. Some investments may be up while others may be down helping minimize the overall potential impact of market decline and enable you to reach your retirement goals smoothly.

Prudent asset allocation can help you balance your appetite for risk within your timeframe and financial goals. This requires assessing, adjusting and tracking your investments regularly.

Assess your portfolio — Assess your portfolio allocation regularly to make sure it matches your risk tolerance, time horizon and financial goals and needs.

Adjust your allocation — Adjust your allocation mix and re-align it to your financial goals based on your risk tolerance and investment horizon.

Track your investments — Revisit your asset allocation regularly to make sure your investments are aligned with your financial goals, since your investment timeframes and risk tolerance may change over time.

A quarterly financial check-up for the short term and a three-year long-term horizon check to make sure your investments are aligned with your risk tolerance and long-term financial goals is usually recommended. However, you need to review your portfolio when you anticipate a major life-event.