Tactical Investment Strategies
Investing in today's fast paced, global environment requires a more disciplined approach then ever before. While there are about as many investment philosophies as there are investors, the approaches break down to two basic types; strategic and tactical.
Strategic investing essentially involves designing an asset allocation consistent with an individuals time and risk parameters, and re-balancing the assets on a periodic basis.
Tactical investing begins with a similar model, but adjusts the portfolio holdings based on current economic conditions. Tactical managers generally hold investments that mirror indexes of various styles, sectors and global regions as well as various bond indexes. They generally have the ability to hold significant cash positions and may invest in commodities or even ETF's that may have short positions in certain markets.
These last few points may be the most significant difference between the two philosophies. Strategic models generally use static allocations that have restrictions on reallocation procedures, and may have limits as to the amount of cash that can be held at any given time. This means that even if the managers feel strongly that the market is poised for a fall, there may be little they can do in the way of reallocating assets to a more defensive position.
At Horizon, we believe that tactical investing has distinct advantages. It allows the manager to adjust your portfolio to ever-changing market conditions, as opposed to hoping that the stock he has selected performs better then the market as a whole.
It is important to note that the tactical strategies are not the same as 'day trading', 'market timing', or 'hedge funds'. These are risky investments that rarely show consistent returns. Rather, these are disciplined investment models that allow a manager to have the tools to protect client's assets during a market down turn.
Any investment plan should begin with a serious discussion of the investor's goals for his money and the tolerance of risk that investor can bear. Only then can a search begin for a manager that can best perform within those constraints.
For more information about how we at the Horizon Investment Management Group can design a plan for you, contact us today.