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Tactical Asset Allocation

Tactical asset allocation makes short-term adjustments from strategic targets to capitalize on market opportunities or avoid perceived risks.

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Exam Tip

Tactical = SHORT-TERM adjustments. Active market timing. Higher costs. Research shows most managers underperform.

What is TAA?

Short-term deviations from strategic targets.

Strategic vs. Tactical

FeatureStrategicTactical
HorizonLong-termShort-term
TargetsFixedVariable
TimingNoYes
CostLowerHigher

Research Shows

Most tactical managers UNDERPERFORM.

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Related Terms

Modern Portfolio Theory (MPT)

MPT is Markowitz's 1952 framework for constructing portfolios to maximize expected return for a given risk level through diversification.

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