Types of Asset Allocation Strategies

-


Asset allocation is the process of dividing an investment portfolio among different asset categories such as stocks, bonds, and cash. The main goal of asset allocation is to balance risk and reward by investing in a mix of assets that aligns with an investor's financial goals, risk tolerance, and time horizon.

There are several different types of asset allocation, each with its own unique characteristics and There are several different types of asset allocation, each with its own unique characteristics and objectives. Here are the main types of asset allocation:

  1. Strategic Asset Allocation: This is a long-term approach that involves determining an appropriate mix of assets based on an individual's goals, risk tolerance, and time horizon. The strategic asset allocation will remain relatively constant over time, with only minor adjustments made as needed. This approach is best for investors who have a long-term horizon and are comfortable with a moderate level of risk.

  2. Tactical Asset Allocation: This is a short-term approach that involves making adjustments to an individual's strategic asset allocation based on market conditions and other factors. This approach is best for investors who are able to actively manage their portfolio and have a higher risk tolerance.

  3. Dynamic Asset Allocation: This approach involves continuously adjusting an individual's asset allocation based on changes in market conditions and other factors. This approach is best for investors who have a high risk tolerance and are comfortable with a high level of portfolio turnover.

  4. Active Asset Allocation: This approach involves actively managing an individual's asset allocation through buying and selling different assets in order to beat the market. This approach is best for investors who have a high risk tolerance and are comfortable with a high level of portfolio turnover.

  5. Passive Asset Allocation: This approach involves a buy-and-hold strategy, in which an individual's asset allocation is not actively managed, but instead remains relatively constant over time. This approach is best for investors who have a low risk tolerance and prefer a more hands-off approach to investing.

  6. Factor-based Asset Allocation: This approach involves allocating assets according to exposure to specific risk factors such as value, momentum, and size. This approach is best for investors who want to gain exposure to specific factors and believe that these factors will drive returns in the future.

  7. Risk-parity Asset Allocation: This approach involves allocating assets based on an assessment of the risk profile of each asset class, rather than its expected return. This approach is best for investors who want to balance risk across different asset classes.

In conclusion, each of these types of asset allocation has its own unique characteristics and objectives. The best approach for an investor will depend on their financial goals, risk tolerance, and time horizon. It's important for investors to consult with a financial advisor before making any decisions about their asset allocation.

Comments

Post a Comment

Popular posts from this blog

The Greatest Jihad

-
Image
Baghdad, Dhaka, Istanbul, Brussels, Paris, Orlando, Boston, Beslan, Mumbai, Peshawar, New York.....Nigeria, Libya, Eqypt, Spain, Indonesia, Russia, Yemen.... Restaurant, Nightclub, Train, Metro, Hotel, Airport, Mosque, Temple, Church, School....the list is multi-dimensional and endless. Somewhere by organisations, some by groups, others by unaffiliated individuals or lone-wolf, the latest media term. Somewhere they kill persons who could not recite Qur'anic verses. Somewhere they kill the masses who are reciter and follower of Qur'an. Today is 29th day of Ramadan. The most pious of all months is about to end. I have observed all my Roza, read my Namaz, recited Qur'an and abstained from things which are prohibited, to the best of my abilities and perseverance. I do not know whether my deeds have been accepted by Allah. But, whatever be the fate of my observance, today I intend to pray the hardest ever to Him. Not for me, but for annihilation and obliteration of a...
Read more

The Greatest Miracle Ever Happened in Sports

-
Image
I am an avid follower of sports. Since the age of 9 in 1982, when Doordarshan live beamed Football World Cup, played in Spain from the Quarter-finals onward, I kept myself abreast on major sporting events. However, 1983 Cricket World Cup drew me passionately towards sports. That miraculous event of India against 60/1 odds, lifting the World Cup at Lords will be one of the greatest folklore in sports history. But Leicester City Football Club winning the English Premier League this year might well be the greatest miracle ever happened in sports.  Miracles do happen in sports. Apart from the Indian win in 1983 Cricket world Cup, there are few other such rousing wins. In 2001, Goran Ivanisevic from being ranked 125 and a wild-card entry to ultimately winning the Wimbledon was nothing short of a miracle. Similar, was in 1991 when James 'Buster' Douglas from being 42/1 odds, to knock-out defeating two year world heavyweight undefeated boxing champion Mi...
Read more

The First Principle

-
Image
Benjamin Franklin was the founding father of the United States.  There is a famous quote by him which  says, "An investment in Knowledge pays the best Interest". Benjamin Franklin was a polymath - an individual whose knowledge spans a substantial number of subjects. But, if we speak of investments in just financial terms, the subjectivity of knowledge and it's importance is profound.     I have come across many investors, who have lost far too much money due to investments in products that they don't understand. The first principle of a sound investment is to have a full understanding of the product and whether you are comfortable investing into it or not.  Yes, investors should take professional help. But still; they should never blindly invest anywhere and everywhere. It is ultimately their money and so they must understand in detail before making investment decisions. It is better to ignore a complicated product with a higher possible retu...
Read more