Is it the first time you are entering this system? Use the following link to activate your id and create your password. Vincenzo Farina. Alessandro Ramponi.
Tactical Asset Allocation Versus Strategic Asset Allocation
How Tactical Asset Allocation Works - (With Example Portfolios)
At Fort Pitt, our financial consultants discuss the overall risk tolerance and objectives with each client to determine an appropriate asset allocation. Once that allocation is determined, our portfolio managers will distribute the capital both strategically and tactically to invest with a focus on what is best for each individual client. Efficient portfolios maintain the optimal mix between different asset classes such as stocks, bonds, and cash with the goal of maximizing returns for a given level of risk. The goal of efficient portfolios could also be described as achieving the lowest level of risk or volatility for a given level of expected return. The strategic asset allocation approach involves sticking with your original allocation over long periods of time, typically spanning a decade or more. Advocates of this approach would argue that the long-term strategic focus helps investors avoid making short-term, emotional decisions based on current market events. After establishing long-term strategic allocation targets, investors will need to periodically rebalance portfolio weightings back to those target allocations.
How Tactical Asset Allocation Works – (With Example Portfolios)
Tactical asset allocation intends to improve a portfolio's risk-adjusted return. Many investors with a long-term investment horizon choose a traditional approach with a strategically composed and diversified portfolio. They justify this investment approach with the Efficient Market Hypothesis and the assumption that returns, volatility, and correlations are, in the long term, relatively stable. The Efficient Market Hypothesis suggests that security prices adjust quickly to new information and fully reflect all available information. In these efficient markets, randomly picking stocks is as good a method as any other investment.
Yet many investors focus on choosing individual investments and put minimal thought into the importance of asset allocation. I spend a great deal of time looking for individual undervalued investment opportunities. Finding investments with a margin of safety is an important aspect of value investing. However choosing your asset allocation is the most underrated concept in value investing. Simply stated, asset allocation is how you divide your assets between different investment classes or groups.