If you're an investor who wants focus on long-term results, you need to know how to apply asset allocation and rebalancing to your portfolio. These concepts are essential to building a foundation for your financial success.

Asset allocation

Asset allocation refers to investing in many types of assets, including stocks, bonds, real estate, minerals, precious metals and more to balance your investment risk and reward. But educated investors know that asset allocation is far more important than security selection. After all, even if you buy the right investment at the right time, watching it double in value won't do you much good if you had invested only 1 percent of your money into it.

This is why you need to focus on percentages, not dollars. The amount of money you have fluctuates daily, but the percentage never changes: You always have 100 percent of your money. So instead of trying to decide how much money to place into a given investment, decide the percentage you'll invest there.

How you allocate your money among the 20 major asset classes and market sectors depends on your goals and how much time you have to achieve them. For example, two people might own identical investments, but the person saving for a retirement 30 years away will allocate money very differently from the person who's planning to pay for college in two years.

Rebalancing

Whenever there's a dramatic drop in prices of some given asset class, investors often overlook the fact that other asset classes are rising. Rebalancing takes advantage of situations like these.

Rebalancing is important. If you don't do it, your portfolio could eventually comprise too much of one asset class and too little of another. That could be devastating to you if the overweighted asset class suddenly falls in value — as those who had all their money in tech stocks discovered in 2000, or real estate in 2007.

If you're unsure how to apply these concepts to your investments, talk with an objective, fee-based financial planner.

Investing strategies such as asset allocation, diversification or rebalancing do not assure or guarantee better performance. There are no guarantees that a portfolio employing these or any other strategy will outperform a portfolio that does not engage in such strategies.

Ric Edelman writes for GOBankingRates.com.