Step 1: Set Objectives
To develop a strategy that is tailored to your unique investment needs, a financial professional must first understand your current financial situation and objectives, as well as the risk level with which you are comfortable. In doing so, your financial professional will help you determine your return expectations, your time horizon and your risk tolerance. These three factors will form the foundation of your unique financial plan. 

Step 2: Develop an Asset Allocation Strategy
The correct asset allocation strategy can provide diversification of your portfolio, while potentially enhancing returns and lowering your overall risk. Based on your particular risk and return objectives, a financial professional can help you determine which particular asset classes are appropriate for your portfolio as well as the percentage of the portfolio that each class should comprise. 

Step 3: Investment Selection & Evaluation
A financial professional’s job is to pare down the choices – more than 10,000 mutual funds, plus thousands of annuities, insurance options and individual securities – to those that fit your objectives and asset allocation strategy. By identifying appropriate options and focusing on your objectives, a financial professional can save you considerable time and effort. 

Step 4: Ongoing Review
Once an investment strategy is implemented, a financial professional will conduct a comprehensive periodic review of your investment objectives, your portfolio’s performance and your overall progress toward meeting your financial goals.

Asset allocation enables an investor to reduce the overall volatility of the portfolio.  However, using an asset allocation methodology does not guarantee greater or more consistent returns nor assures against market loss.
Diversification can be thought of as spreading your investment dollars into various asset classes to add balance to your portfolio. Although it doesn't guarantee a profit, it may be able to reduce the volatility of your portfolio.