Tactical Asset Allocation: A Guide to Dynamic Portfolio Management

Tactical asset allocation is a type of investment strategy in which an investor changes the allocation of their portfolio, depending on market conditions. This is generally considered to be a more active type of asset allocation. Here are the basics of tactical asset allocation.

Tactical Asset Allocation

With a regular asset allocation strategy, an investor will keep the percentages of assets they have in each class the same. For example, they might set an asset allocation of 60 percent stocks and 40 percent bonds. With tactical asset allocation, the investor will change this percentage, depending on market conditions. For example, if the stock market is doing really well, they might increase their percentage to 70 percent stocks and 30 percent bonds. 

Considerations

This type of investment strategy can be beneficial because it allows you to take advantage of market conditions. However, with this strategy, there is also an element of trying to time the market. This can be very difficult and it could potentially result in losing more money than if you had left the asset allocation alone. This type of investing strategy is not for everyone, but an investor with a little luck can make this a good investment strategy.