Investor Corner/Building and judging a portfolio/Portfolio Construction & Behaviour
3.1.2 Strategic vs Tactical Allocation
Strategic allocation is a long-term target mix set in advance. Tactical allocation is a deliberate, temporary deviation from that target based on a current market view. Most investors are better served sticking mainly to the strategic mix.
Two different time horizons for the same decision
Strategic allocation is decided based on long-term goals, time horizon and risk tolerance, and is meant to hold steady through most normal market conditions. Tactical allocation is a shorter-term adjustment layered on top, based on a view that some asset class looks unusually attractive or unattractive right now.
Why tactical calls are harder to get right than they look
Making a successful tactical shift requires being right not just about direction, but about timing on both the entry and the eventual return to the strategic mix. Being early, being late, or simply being wrong on any one of these three requirements is common enough that persistent tactical outperformance has proven difficult to achieve consistently, even among professional investors making it their full-time focus.
A reasonable middle ground
Many well-run portfolios keep the vast majority of assets anchored to a strategic mix, with only a small, clearly bounded portion available for tactical tilts. This limits the potential damage from a wrong tactical call while still allowing for some flexibility when a genuinely compelling case presents itself.
How PriLytics helps. PriLytics tracks your allocation against your own targets over time, so any drift, tactical or accidental, is visible and easy to correct through rebalancing. See your true asset allocation.