Strategic Asset Allocation refers to allocation of funds in various asset classes based on Investor’s risk profile and financial goals. Tactical Asset Allocation refers to allocation of funds in as per the trend or anticipated price movement in an asset class.
While investing according to Strategic Asset allocation strategy, one invests from a long term perspective. The asset class or financial instruments (Example: Equity, Debt, Mutual Funds, Real Estate, etc.) are selected based on the risk profile of the investor after considering his short term and long term financial goals.
While investing according to Tactical Asset allocation, one invests from a short term perspective. The surplus funds of an individual are invested in assets (Financial or Physical) while are likely to appreciate quickly in the near future. Assets are purchased when their valuation is low or relatively low and are likely to appreciate quickly due to demand or some other economic or political factor. They are sold when the investor feels that they are unlikely to appreciate further in the near future or if he finds another asset class which is likely to give better returns.
Strategic Asset allocation strategy is less risky as compared to Tactical Asset allocation and suitable for investors who are not very active in terms of their approach to investments. Tactical Asset allocation is used for making short term gains. Tactical asset allocation requires a very active approach to investments.
Mungekar Wealth 