William O'Neill's detailed research many years ago proved that 91.5% of the returns on a long term investment portfolio were determined by its asset allocation rather than choice of fund or fund manager. Asset allocation is basically diversifying your investment risk by investing in the 4 asset classes of equities, property, bonds and cash.

The rationale behind this approach is that not all asset classes behave in the same way, that's to say they are not all closely correlated. What this means is that when for example property prices are rising share prices may be falling.

Of course the trick is to know which asset class or classes to be invested in at any one time which does require a degree of subjective judgement. However, there are a number of asset allocation modelling tools that investors can use to help them decide how much to invest in each asset class. These models need your investment timeframe, your attitude to investment risk and your income needs, if any, before a tailor-made asset allocation report can be prepared for you.

It's not a perfect system but it sure beats guesswork and, in my experience, it works.