Chapter 18
Tactical Asset Allocation
Aligning your portfolio with current market conditions
‘Most investors want to do today what they should have done yesterday.’
Larry Summers
Tactical Asset Allocation (TAA) deviates from the weights of SAA in that it attempts to mitigate risks and enhance returns. For example, if you think an asset in your portfolio is likely to lose money, you can sell it or reduce its allocation. Or if you think an asset in or outside (off benchmark) your portfolio is likely to perform well, you can buy more of it or include it. Hopefully, you will add value.
Dynamic SAA and TAA differ. Dynamic SAA targets a medium (1–5 years) to long (5–10 years) horizon, whilst TAA targets a short horizon (up to 12 months). Dynamic SAA ...
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