Tactical Asset Allocation

For someone this topic is quiet boring and far from what they have think about what an investment should be. But, trust me this Tactical Asset Allocation is so handful and very powerful tools to help you achieve handsome reward in investment.

What Does Tactical Asset Allocation Mean?

 Tactical asset allocation (TAA) is a dynamic investment strategy that actively (per quarter, half or a full year) adjusts a portfolio’s asset allocation. The goal of TAA strategies is to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance and investment horizon.

The three main asset classes - equities, fixed-income, and cash and equivalents - have different levels of risk
and return, so each will behave differently over time.

How Tactical Asset Allocation Works?

At first you must define the percentage of asset allocation that suited you. For younger investor,it's recommended you put higher portion in equities. And,vice-versa for an older investor,it's recommended you allocate higher portion in fixed-income.

For example (for a case of study), a 30's year investor is using TAA and his portfolio is like this.

Year : 2009
Equities          - ($50K)     50%
Fixed-income - ($40K)     40%
Cash              - ($10K)     10%
                     -------------------
TOTAL         - ($100K) 100%
                     -----------------------


And, a year after that a stock market is rising and his portfolio is becoming like this

Year : 2010

Equities          - ($90K)     60%
Fixed-income - ($45K)     30%
Cash              - ($15K)     10%
                     -------------------

TOTAL         - ($150K) 100%
                     -----------------------

Using TAA, he sold $15K of his equities and put it in the fixed-income. Later, his portfolio as show below.


Year : 20010
 

Equities          - ($75K)     50%
Fixed-income - ($60K)     40%
Cash              - ($15K)     10%
                     -------------------

TOTAL         - ($150K) 100%
                     -----------------------


How Tactical Asset Allocation Works in Malaysia?


There were some option to use TAA in Malaysia. But, this is some guide that you can use or you can modify this to suit you.


Equities            - 50%
Fixed-income   - 30%
Cash                - 20%


You might modify it and add unit trust, REITS, properties etc. 

Happy investing

- aMiR-