An asset allocation strategy involves deciding how to distribute investments across asset classes like equities, bonds, and cash.
Your choice of strategy significantly impacts potential returns and risks.
Strategic asset allocation
Strategic asset allocation involves setting a target allocation for each asset class based on financial goals and risk tolerance, with periodic rebalancing to maintain this fixed allocation.
Its main advantage is consistency, helping investors avoid impulsive decisions and manage emotional biases.
However, its lack of flexibility can lead to missed opportunities, as it does not adapt to changing market conditions.
Tactical asset allocation
Tactical asset allocation allows investors to adjust their portfolio in response to short-term market conditions, potentially enhancing returns.
This strategy is more flexible and allows for active risk management.
However, it requires significant time, knowledge, and resources to implement effectively without the help of a financial adviser.
The frequent trading involved can also result in higher transaction costs and tax liabilities.
Dynamic asset allocation
Dynamic asset allocation involves frequent portfolio adjustments to optimise performance in response to market changes.
It offers adaptability and can be effective in volatile markets.
However, it demands intensive management and expertise, with higher transaction costs potentially offsetting your gains.
Core-satellite approach
The core-satellite approach combines a stable core of diversified assets with a smaller, actively managed satellite portion.
This strategy offers diversification and customisation, but it requires more attention and expertise than simpler strategies, as the satellite portion may involve more active management.
Additionally, the more frequent trading associated with the satellite investments can lead to higher costs, which need to be carefully managed.
In short, choosing the right asset allocation strategy is a critical decision that should be based on your individual goals, risk tolerance, and market outlook.
To make the most informed choice, it is advisable to consult with an Independent Financial Adviser.
Chat to our team for help or more information.
Our BLOG
How to budget for life after work – Our retirement advice
TESTIMONIALS
The staff at CST are always very friendly and approachable.… Read more “Mr JD Dolling, SW Heating Equipment Ltd”
We have been with CST for more than seven years… Read more “Doris Francis, Engineering Services (Bridgend) Ltd”
Our business has been handled by CST for many, many… Read more “Mr & Mrs Rise”
I moved my business to Clay Shaw Thomas because I… Read more “Sandra Wilkinson of Sage Marketing”
The audit was well planned and executed efficiently, with minimum… Read more “GE Carpentry”
Privately and within the company Clay Shaw Thomas provides a… Read more “Seashore Enterprises”
I am very happy with the service from CST. An… Read more “Mr Atkinson “
The family connection with CST goes back many years and… Read more “Dr Jones”
CST are very efficient, courteous and proactive when dealing with… Read more “Mr CMG Adams”
I have been a client for over twenty years and… Read more “Mr J T Wall”
Always one step ahead of the game, CST have helped… Read more “Mr RT Evans”
CST Staff always give unbiased advice in a clear and… Read more “Mr L Branfield”
It has been a professional pleasure working with CST, they… Read more “Mr P Jenkins”
SUBSCRIBE to our list
If you would like to see full details of our data practices please visit our Privacy Policy and if you have any questions please email info@cstwealth.co.uk.