The S&P BSE Small-cap index hit a record high in June 2023, indicating momentum in the broader market space, while the S&P BSE Midcap index also hit a record high. Asset allocation is paramount for investors in such an environment; experts suggest allocating 20% of a portfolio to mid and small-cap stocks. Investors should strike a balance between different asset classes based on risk-reward profiles, diversification, and optimizing returns. Large and flexi-cap stocks offer stability, while mid and small-caps provide attractive growth prospects. Prudent investment decision-making and portfolio management can mitigate risks and optimize returns in ever-changing markets.