Strategic vs. Tactical Asset Allocation
Long-term policy weights versus short-term deviations from them.
What is Strategic vs. Tactical Asset Allocation?
Strategic allocation sets long-term target weights from the client's goals and risk tolerance and rebalances back to them. Tactical allocation deliberately departs from those targets for a time to exploit expected market conditions, then returns. Tactical is an active management decision layered on a strategic base.
Strategic vs. Tactical Asset Allocation: a worked example
Strategic target 60/40; tactically moving to 65/35 for six months on an expected equity rally.
More terms in Clients, Strategy & Tax
Sole Proprietorship
A business owned by one person with no legal separation from the owner.
General Partnership
Co-owners share management and unlimited liability; income passes through.
Limited Liability Company (LLC)
Limited liability for owners with pass-through taxation by default.
C Corporation
A separate taxpayer - profits taxed at the corporate level, then again as dividends.
S Corporation
A corporation that passes income through to shareholders, avoiding double tax.
Trust & Estate Accounts
Accounts run by a fiduciary - a trustee or an executor - under a governing document.
Foundations & Charities
Tax-exempt organizations investing for a mission, often in perpetuity.
Client Profile & Data Gathering
The financial and nonfinancial facts every recommendation must rest on.