A good asset allocation strategy is one that has a diversified mix of investments that will help keep you on track to reach your goals while giving equal consideration to your tolerance for risk. In addition to helping reduce your portfolio’s overall volatility and improving your chances to earn more consistent returns over time, it helps you avoid the temptation to try to time the market.

Investors can run into problems when they overestimate their ability to deal with market declines. Jumping in and out of the market based on short-term shifts can lead to missing out on longer term opportunities, as well as situations whereby you end up buying high and selling low.

A solid asset allocation plan may help you better weather temporary market storms, so you can reach the longer term results you are after.

You should note, however, while an asset allocation plan can be a valuable tool, diversification and asset allocation do not guarantee a profit or protect against a loss. All investments involve risks, including possible loss of principal. Typically, the greater the potential return, the more risk involved.