While you start with strategic asset allocation and can just stay with it, there are investing periods when tactical decisions can help you make the most of your investments.
Consider some questions that may have crossed your mind –
- Should I invest only in large caps OR a combination of Large + mid caps?
- Should small caps figure in the portfolio? If yes, how much?
- I am an aggressive investor. When should I start taking exposure to small caps?*
- Should I go full in with my money or hold back?
- Should I invest lumpsum now or spread my investment over time via STP?
How can I benefit from the current interest rate environment? Can you generate some capital gains?How to position my fixed income portfolio when interest rates are dropping? What to do when interest rates are rising?
*Yes, even though you are an aggressive investor, there are times when exposure to small caps needs to be curtailed.
With these questions, you are making a tactical effort to enhance your portfolio returns whilst reducing risk.
The actions driven by tactical allocations may be made on market events basis.
Remember though, the market has its own mind. You may try to take a logical, considered view based on numbers and analysis but you cannot be right all the time.
It might also involve long waiting periods for an investable opportunity to appear or once invested to yield result.