Tag Archives: Tactical Asset Allocation

The 50-50 Portfolio Solution?

The New York Times had a piece this weekend that proposes a simple portfolio solution for worried investors. 

Are you ready for this? 

The portfolio is a 50% allocation to stocks and 50% to bonds.  The conclusion that the 50/50 portfolio makes sense is based on a study by Vanguard published in October 2011 that finds that this allocation seems to generate consistent returns, regardless of whether the economy is in recession or expansion.  The study is based on portfolio performance from 1926 through June 2009. 

The 50/50 portfolio generated an average annual return of 7.75% per year during recessions and 9.9% per year during expansions.  Continue reading

Tactical Driving

Earlier this week we ran a piece on the difference between Tactical Asset Allocation and passive investing. In this guest post,  Michael A. Gayed of Pension Partners, a Tactical asset manager, weighs in.

As we approach summer, I can’t help but think about how people drive. After all, Americans are expected to be on the road to go on vacation as the weather gets warmer. Continue reading

What’s the Difference Between Passive Investing and Tactical Asset Allocation?

Recently we wrote a post about Tactical Asset Allocation and how tough it can be to execute effectively. That in turn set off a discussion of the lack of meaning in terms like “buy-and-hold” and “tactical asset allocation.” I was accused of setting up a false dichotomy. There are stocks that you buy and hold. You do that because they continue to do well, argued Roger Lowenstein. But you do have to be willing to let go of the ones that aren’t working.

Lowenstein believes in stock-picking, but if you don’t think that you have that skill, or if you want to balance a few such picks with a broader diversified approach, then you may indeed be interested in the passive v. allocation debate.

In a recent post on his Wise Investing blog, Larry Swedroe sought to better explain just what passive investing in. It is not “by and hold.” Passive investing is passive, but not pulse-less. Continue reading

Tackling Tactical Asset Allocation

Since the market turbulence of the late 2000’s shot investors’ faith in more traditional investing, there’s been quite a lot of discussion of Tactical Asset Allocation.

This form of investing focuses on allocating certain portions of your portfolio to different asset classes, and then ramping up or pulling back on any one of those classes depending on certain factors. The most common of those factors is valuation: if stocks, for example, start to look very cheap based on historical metrics (like price to earnings ratios) you might load up on those. World events might drive some sector rotation as well. Uncertainty in the oil producing regions of the world might convince an investor that there could be an economic slowdown brewing and push them to put more into cash.

Doubts About Tactical Asset Allocation

In a way, it’s a middle ground between trying to pick individual winning stocks and hands-off investing, which focuses on the long term and minimal trading. The problem is, it’s hard to consistently do well. Continue reading