Asset Allocation

"Don't put all your eggs in one Basket."

Strategic Asset Allocation
     It is allocation aligned to the financial goals of the individual. It is a long term strategy where choice of asset classes that will be part of the investment portfolio is usually based on the short term and long term financial goals set in place by the investor. The goal is to generate the targeted return while keep in the level of risk to the investor  low. The proportional allocation to each asset class is driven by investor objectives and constraints and is re balanced to the asset allocation that was determined to meet the desired goal. Strategic asset allocation may involve periodic re balancing to restore the original proportions to various asset classes. 
     It can under perform during bull runs in certain assets, when it would systematically take out of a winning asset class and invest the proceeds into a losing asset class to maintain a fixed ratio between the two asset classes.


Tactical Asset Allocation
        It is decision that comes out of calls on the likely behavior of the market. It is suitable only for seasoned investors operating with largest indigestible surpluses. 
             Even such investors might like to set a limit to the size of the portfolio on which they would take frequent tactical asset allocation calls. 

Dynamic Asset Allocation
     It works on the basis of a pre-specified model which does a mechanical re balancing between asset classes. 
     The allocation to each asset class is not a fixed percentage, but varies depending on the performance of chosen asset class variables.