Strategic Asset Allocations

So what might an actual strategic asset allocation look like? This depends entirely on who you ask at any given time, but it’s good to have a general idea. Below are three examples for risk profiles Conservative, Balanced and Growth:

Screen Shot 2017-06-25 at 8.34.02 AM

Note how a conservative investor has a heavier weighting to cash and bonds, whereas a growth investor has a heavier weighting to equities. These are by no means set in stone and may vary from year to year, but they are not going to vary from month to month – if you are changing the allocation that often then you are behaving tactically. Professional investors do this as a matter of course: Their strategic weighting to domestic bonds may be 15%, but if they are currently negative on bonds for a particular reason, they may adjust this tactically back to 10% for a period. However, when they rebalance at the end of the year they will rebalance back to the original strategic weighting of 15%.

Here’s what a strategic asset allocation may look like with a “tactical overlay” (T) – a temporary adjustment for tactical reasons:

Screen Shot 2017-06-25 at 8.59.41 AM

Please note that these are not investment recommendations, they are simply examples to show you what certain asset allocations may look like. If this level of detail is a little overwhelming, don’t worry. We will look at ways to simplify this in future posts.

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