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Tactical vs. Strategic Asset Allocation
Gratus Advisors Can Help You Decide Which Strategy is Best for You.
Understanding Tactical vs. Strategic Asset Allocation
Asset allocation isn’t a simple process, and using a cookie-cutter approach to determine asset classes and percentages usually doesn’t help investors maximize their portfolio’s potential. Allocation takes time and thought, along with an approach that best meets the needs of the individual investor.
Tactical Asset Allocation
Tactical asset allocation is an interactive approach to investing that focuses on short- and medium-term goals. Investors choose assets based on expected market or sector performance over the next few months and years, and make changes in their allocations and assets as needed to meet performance goals. In other words, they move in and out of the market. This approach often suits a particular personality type that can combine discipline with the ability to face down anxiety as market conditions change.
Strategic Asset Allocation
Strategic asset allocation is an approach that focuses on long-range goals and takes a more hands-off approach. Investors divide their portfolio among reliable assets like stocks and bonds and allocate them accordingly. The choice investments are held on to for the long term in anticipation of an increase in value.
It should be noted, however, that strategic asset allocation isn’t completely set-it-and-forget-it: While the emphasis is on letting assets ride out market vicissitudes, there are times when adjustments need to be made, particularly when a previously reliable asset shows signs of losing value. These changes may include the assets themselves or the percentages allocated to them in the portfolio.
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Which Allocation Approach Is Best?
Both allocation approaches have their advantages and shortcomings. For risk-averse investors, as well as those who prefer to not constantly monitor markets and their portfolios, strategic asset allocation is a solid option. For those who can tolerate more risk, who hope to grow their wealth more quickly or who simply like to be involved in the ongoing management of their investments, tactical asset allocation may be the best choice.
Deciding on the correct approach, the selection of assets, their allocations and their management are all separate issues. A registered wealth advisor at Gratus Capital may be able to provide guidance in all of these areas. Wealth advisors get to know you, your family and your goals and, with that information, develop an investment plan that might lead to the results you are hoping for.