What is an asset allocation plan? Basically it is an individual investment plan that is pertain to your level of risk, diversification, and to achieve your financial goals. Figuring out how much risk you want to take, do you want to go 100% stock or 80% stock and 20% bond? Diversification can be investing in foreign holding, REIT, small cap, mid cap, large cap, and etc. Constructing a diversify portfolio will minimize your risk, if one sector go down the drain the other might not be affected. The other sector may be able to post some gains and lift under performing sectors. Many people have the mentality of just following the media and the hype of big company. When price drop they tend to panic and sell. Developing an asset allocation plan can ease your mind; make an effort to rebalanced your portfolio every year so your portfolio doesn’t go out of whack. Since you develop a plan you will be able to sell high and buy low. Remember you’re investing for the long term and remember your financial goals, because everyone will eventually want to retire and sitting on a beach drinking some tequila. I know I want to eventually.