Allocation strategies refer to the methods used to distribute resources, such as capital or assets, among various investment options. These strategies aim to optimize returns while managing risk by diversifying investments across different asset classes, such as stocks, bonds, and real estate. Common allocation strategies include strategic asset allocation, which sets a long-term target mix based on risk tolerance, and tactical asset allocation, which allows for short-term adjustments based on market conditions. By employing these strategies, investors can better align their portfolios with their financial goals and market dynamics.