In the context of investing, asset allocation involves balancing risk and return by diversifying investments across different asset classes. This strategy is based on the premise that different asset classes will perform differently over time, depending on market conditions. For example, stocks generally provide higher long-term returns than bonds but also come with greater volatility. By diversifying, investors can mitigate risk while aiming for a satisfactory return on investment. Implementing an asset allocation strategy requires continual assessment and adjustment based on health-of-the-financial-market conditions and financial goals.