Compare Strategies

The Traditional "BUY & HOLD" Approach to Financial Planning is Obsolete & Can Cost You Money.

For years financial advisors have employed the Strategic (BUY & HOLD) Method of investing because they lacked the information to accurately predict market performance. Therefore it was much safer to adopt a long-term approach to making investment decisions. "Tactical rebalancing...does not seek to rebalance back to a target mix at regular intervals...a tactical investor constantly monitors the global financial markets and makes rebalancing decisions based on perceived opportunities and risks among various asset classes and market sectors...(and) can occur at any time." 3

Comparison Chart

Strategic Asset Allocation

Tactical Asset Allocation

Examines historical patterns of behavior among asset classes (returns, risks, and correlation, etc.)	YES	YES
Is my asset allocation changed?	NO. Theory is that over the long haul asset class performance averages out. Regularly moving profits to underperforming assets maintains your target allocation.	YES. Asset classes are managed in permissible ranges, and if not, shifts need to be made in the target mix. Therefore the Buy, Review & Update method may be more appropriate.
Is the financial data being reviewed?	NO. There is monitoring for report purposes, but asset classes are not changed. The weights of the asset classes are pre-determined and the portfolio is periodically rebalanced so asset class weights reflect that pre-determined or “strategic” mix. Funds are sold in the best performing assets and reinvested in the worst.	YES. Constantly. Why? Because our economy changes as frequently as the weather. Therefore, monitoring allows for changes to be made seeking optimum performance and lower potential losses in the portfolio.
What's the impact of a major change in the economy?	Once the asset allocation is set, no large shifts are made. In a bear market you have predetermined that major changes will not be made when using a strategic model.	Portfolio strategists continually review markets and the economy. Which asset classes are used and how much is invested in each asset class is subject to change.
Do short-term swings in the markets affect overall strategy?	NO. This is a passive and generally less expensive investment approach that accepts returns in line with a broader market…whether up or down.	YES. This approach takes advantage of areas of the market that tactical disciplines identify. This approach capitalizes on perceived pricing opportunities and forces profit taking in an effort to reduce risk.

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3. The Art of Investing and Portfolio Management; 2nd edition; Cordes/O'Toole/Steiny; McGraw Hill, 2008; pg. 93.