Currently my allocation is 83:17 (Equity: Debt). The allocation is determined by the market. Generally I believe that I need to worry about what I control and I dont want to worry too much about the things that are beyond my control. I don’t have any skill to predict growth rate, what management would do, what would be the GDP growth rate, where oil prices heading towards etc. Rather I would try to be more reactive and see what is the price I can pay with respect to the value offered by the stock market.
Now coming back to the asset allocation, it is determined by based on the attractiveness of the stocks at a particular point in time. If none of the stocks are cheap or in my buy range, my monthly installment stay in cash. if something comes cheap, I end up deploying my cash. if I see a stock which had run up a lot, then I sell it and cash component increases irrespective of the market condition.
Like I explained in my portfolio thread, my source of money is my salary. So I can do SIP sort of periodic monthly investment. Once I had built a portfolio, I can add the delta amount every month based on which of my stocks are cheap or any other new stock has become attractive where I can initiate a position. There would be times when I get opportunities to switch from any existing stock to new idea completely in one shot. All those decisions will be based on level of attractiveness in the new or existing opportunity that I have and fully priced nature of any of my current holdings etc.
By this process, I keep reviewing my portfolio every month and take actions if required. Diversified nature helps me to ride volatile phases and I am dependent on my alpha generation based on stock picking and timing and patience.
Unless one is very skillful and astute stock picker who can be swift in changing portfolio and predict trends and growths, sticking to one investment philosophy and being patient will help you to be successful.
Disclaimer: Please take my point with a pinch of salt. I am neither an expert nor have been proved 100% right on all my investment decisions . I am happy to share my points as it helps to me learn from fellow investors.