Investments - An introduction to Tactical Asset Allocation

Investors selecting an appropriate portfolio to help boost their retirement savings are often bewildered by the array of investment opportunities available.

When it comes to securing a suitable retirement investment portfolio, Retirement and Investment Solutions believe diversification is a fundamental concept. A diversified portfolio spreads the risk over many different areas, obtaining returns from multiple channels to generate more consistent and stable results, instead of adopting more volatile individual avenues.

In today’s sophisticated global financial markets, there are countless possibilities to help boost your retirement income, one of which is Tactical Asset Allocation. Tactical Asset Allocation is the practice of shifting an asset allocation by relatively small amounts to benefit from short to medium economic or market opportunities. Instead of buying and selling stocks, you add other asset classes to the mix such as bonds, gold, silver, currencies, etc. This way, when one asset goes down in price, others rise. Ideally, the gains are higher than the losses, which results in a slow, steady growth in your overall investment portfolio.

Tactical allocation involves making a judgment call on where you think the economy and the financial markets may be headed, in order to navigate financial market uncertainty.  As shown in the table below, there can be a wide variation in asset class each year, so it can be effective to have an asset mix that reduces risk when markets are volatile and takes a few more calculated risks when markets are more stable.

Asset-table
The table above highlights how each of the different asset classes have performed over the last 10 years.  As you will see, not one of the asset classes has consistently been a top performer.  For example, Asia Equity was top in 2012, but was the second worst performing class one year earlier.   In 2012 Commodities propped up the table and Gilts (a bond issued by the UK government) topped the table in 2011.  However, markets can be unpredictable, which means that strong performance one year may not guarantee a return the next.

By maintaining an active approach to asset allocation, investors can identify shorter-term investment opportunities, with the view that at times certain assets and markets offer better value than others.

Current market conditions are driving investors to think more tactically when reviewing the investment avenues they explore. However, methods like Tactical Asset Allocation involve frequent trading and higher maintenance and expertise in order to generate the results you desire.

When faced with investment opportunities, the importance of planning ahead becomes clear. Developing a portfolio structure that is capable of withstanding changes in the future can make all the difference when improving your retirement income. When constructing your portfolio, it is important to recognise that methods such as Tactical Asset Allocation can be an extension of your investment portfolio, instead of an alternative to it.  The main goal to consider when reviewing your investments is diversification, so that no one investment will make or break your finances.

At Retirement and Investment Solutions, we tailor our advice and recommendations to your personal circumstances, ensuring that your investments work for you and your needs. If you are struggling to choose the most appropriate investment opportunities, take advantage of our free no-obligation investment review.  Call us on 01489 878300 or email This email address is being protected from spambots. You need JavaScript enabled to view it. This e-mail address is being protected from spambots. You need JavaScript enabled to view it . 

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