Asset allocation is the split of your money across broad categories — equity (stocks/equity mutual funds), debt (FDs, bonds, debt funds), gold, and sometimes real estate.
Rough starter mix by age: 100 − your age = % in equity. A 30-year-old might hold 70% equity, 25% debt, 5% gold. A 55-year-old flips much of the equity into debt for stability.
Rebalance once a year. If equity has surged and become 82% of your portfolio when your target was 70%, sell 12% of equity and shift it to debt. This forces you to sell high, buy low, mechanically.
Why this matters more than stock picking: research consistently shows asset allocation explains ~90% of long-term portfolio outcomes. Which specific stock you own inside your equity slice explains far less.