Does Tactical Asset Allocation Mean Market Timing?
ETFs tempt more managers to try tactical asset allocation.
Eric Biegeleisen is director of research at Windhaven Investment Management, an adviser in Boston.
Tactical asset allocation seems to be all the rage among money managers. What exactly is this strategy?
It’s different things to different people, but by and large it means making opportunistic investment decisions. Traders look at opportunities daily, weekly, monthly or annually. Tactical opportunities can even have multiple-year horizons. The boom in exchange-traded funds has led to the rise in tactical investing. There are more than 1,400 ETFs in the U.S., representing stocks, bonds, hard assets and currencies. Most are easily tradable on a daily basis. That gives tactical investors the tools they need to make the bets they want to make.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Isn’t it just a fancy name for market timing?
We don’t think so, although it is certainly more like market timing than, say, holding a core strategic position for longer periods. We review, rebalance and reallocate our tactical holdings every four months. We take action sooner if anything changes.
Sounds risky.
Windhaven’s funds aren’t 100% tactical. Each portfolio has a core allocation, too—an all-weather portfolio that can stand on its own. In our most conservative portfolio, only one-fifth of assets are invested tactically. But even in our most aggressive portfolio, only a little under half is tactical. More than half of the assets in all of our portfolios are invested in core strategic holdings.
Can investors do this on their own?
Yes, but you have to figure out what and when to buy and how much. That’s hard to do. Those shooting from the hip are not likely to do well. We evaluate each asset class in relation to fundamental factors (such as price relative to various yardsticks), the economy and the mood of investors. We adjust our outlook for the risk we perceive in each asset, then rank them from most attractive to least attractive.
Where do you see opportunities now?
We recently added international real estate investment trusts to our tactical allocation. The tactical portfolio also holds tech stocks, stocks with growing dividends, U.S. REITs, U.S. high-yield bonds, U.S. investment-grade bonds, gold and Treasury inflation-protected securities.
Kiplinger's Investing for Income will help you maximize your cash yield under any economic conditions. Download the premier issue for free.
-
We're 64 with $4.3 million and can't agree on when to retire.I want to retire now and pay for health insurance until we get Medicare. My wife says we should work 10 more months. Who's right?
-
Missed an RMD? How to Avoid That (and the Penalty) Next TimeIf you miss your RMDs, you could face a hefty fine. Here are four ways to stay on top of your payments — and on the right side of the IRS.
-
What Really Happens in the First 30 Days After Someone DiesThe administrative requirements following a death move quickly. This is how to ensure your loved ones won't be plunged into chaos during a time of distress.
-
Best Banks for High-Net-Worth Clientswealth management These banks welcome customers who keep high balances in deposit and investment accounts, showering them with fee breaks and access to financial-planning services.
-
Stock Market Holidays in 2026: NYSE, NASDAQ and Wall Street HolidaysMarkets When are the stock market holidays? Here, we look at which days the NYSE, Nasdaq and bond markets are off in 2026.
-
Stock Market Trading Hours: What Time Is the Stock Market Open Today?Markets When does the market open? While the stock market has regular hours, trading doesn't necessarily stop when the major exchanges close.
-
Bogleheads Stay the CourseBears and market volatility don’t scare these die-hard Vanguard investors.
-
The Current I-Bond Rate Is Mildly Attractive. Here's Why.Investing for Income The current I-bond rate is active until April 2026 and presents an attractive value, if not as attractive as in the recent past.
-
What Are I-Bonds? Inflation Made Them Popular. What Now?savings bonds Inflation has made Series I savings bonds, known as I-bonds, enormously popular with risk-averse investors. How do they work?
-
This New Sustainable ETF’s Pitch? Give Back Profits.investing Newday’s ETF partners with UNICEF and other groups.
-
As the Market Falls, New Retirees Need a Planretirement If you’re in the early stages of your retirement, you’re likely in a rough spot watching your portfolio shrink. We have some strategies to make the best of things.
