What is Tactical Asset Allocation

Tactical asset allocation (TAA) is an investment strategy that actively makes adjustments to portfolio holdings to take advantage of short or medium-term factors including market momentum, asset valuation, and economic conditions with the goal of improving returns and reducing risk. 

The investment strategies developed at indexfundtrends.com measure stock market and economic data on a monthly schedule.  Our mathematical models are based on the strategic models created by academics, and practicians and are published in over 200 whitepapers.  The stategies make changes to asset allocation when market conditions change.  By using a systematic approach, we are able to automate our investment models and remove emotional decisions from the process.

Strategic versus Tactical Asset Allocation

Strategic Asset Allocation (SAA) on the other hand takes a longer-term outlook in determining asset allocation, and is more focused on an investor’s risk profile and financial goals, and tends to ignore current market conditions when determining asset allocation.  An example of a strategic asset allocation is a buy-and-hold strategy that rebalances assets annually and determines asset allocation based on an investor’s age and time to retirement.