New Delhi, April 16 -- Asset allocation is the process of splitting investments across different asset classes to balance risk and return. Common categories include fixed-income instruments such as Public Provident Fund (PPF), equity investments like stocks and mutual funds, and precious metals such as gold.

Each asset class brings different characteristics and risk factors. PPF, which is backed by the government, offers assured returns and tax benefits, whereas equity investments are market-linked and subject to price fluctuations. Gold is often used as a hedge against inflation and market volatility. Asset allocation involves determining how much of the total investment is placed in each of these categories to get optimal returns.

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