This paper investigates asset allocation to stocks, real estate, bonds and treasury bills under in the presence of regime switching. The joint distribution of asset returns is captured by a four-regime framework of bull, high volatile, slow growth and crash states in a four-variable model and eight-variables framework. Investors tend to allocate significant proportion of wealth to equity REITs regardless of the initial states, especially in the long term. Moreover, when accounting for horizon of investment in different regimes, investors allocate more to the risky assets than risk-free asset. Next I will study whether horizontal effects can be captured after adding Markov-switching framework to the model, proving the predictability power of switching regimes.