A strategic and tactical asset allocation mix

on Jan 4, 2013 in Home, Portfolio ad hoc | 1,818 comments

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Today’s investors clearly face significant challenges in meeting investment objectives, particularly in an environment of relatively modest returns. Identifying and efficiently executing an appropriate asset allocation strategy to meet those investment objectives is important.

Neither strategic nor tactical portfolios will shoot the lights out, as they are structured to obtain a specific return for a particular risk over a market cycle which is generally defined as eight to ten years.

In summary, it is fundamental to decide upon an investing strategy, and stick to it. It can be compared to setting a course when starting on a long journey and following it faithfully. On a tactical level, you simply adjust your route only when conditions change. The type of asset allocation strategy that works the best for you then will depend largely on your time horizon and your ability to tolerate risk.
I suggest that investors must realize that asset allocation is critical when seeking an investment strategy. They should spend a great deal of time and effort on making sure their asset allocation strategy best reflects their temperament, time frame and objectives.

So in the words of the famous saying, conservative investors aim to keep the “bird in the hand,” while aggressive investors seek to gain the “two in the bush.”