Tactical Asset Allocation Strategies

Most of today's active advisors were trained in the era of "buy and hold". We were taught that a well-chosen, diversified portfolio of stocks and bonds would endure the ups and downs of short-term market fluctuations and provide superior returns over the long-term. After two severe bear markets within the last 10 years, we have found sitting idle on clients' portfolios waiting for the big finish is not working. Looking forward, we see significant economic and geo-political risk. Big deficits, below average GDP growth, unrestrained inflation or deflation can cause another market meltdown at any time.  There is no question that successful investing includes avoiding disastrous losses.

Tactical Asset Allocation is a strategy that can lower portfolio volatility, limit dramatic losses and improve gains in otherwise fickle bear markets. Since late 2007, we have been recommending TAA for clients whose risk-tolerance levels, net worth and financial needs make TAA an appropriate choice. We are extremely pleased with the results. Overall, our TAA clients suffered only nominal portfolio declines in 2008, while enjoying very strong returns in 2009. The goal of preventing significant loss in the bear market while participating in the bull has been achieved.

TAA is not something we do in-house. TAA uses systematic rules-based evaluation of such indicators as asset class momentum, sentiment analysis and fundamental valuation signals to monitor and adjust portfolios on a daily basis. The level of sophistication, experience and ability to handle such large quantities of data is, frankly, beyond our capabilities. After extensive research, we have identified third-party investment managers who have employed TAA successfully. Our task is to introduce appropriate clients to these managers, then maintain a careful watch over these accounts to make sure performance is matching our parameters. For more detailed information, contact either Rich Campbell or Tess Miller.