In theory, most tactical management styles can be grouped into one of three categories: partially tactical, fully tactical but non-diversified, and our approach – fully tactical with actual diversification.
The partially tactical management style typically begins with a base asset allocation with exposure to different types of stocks and bonds. This exposure is then varied, within limits, based on the market analysis. The partially tactical approach can still expose investors to unacceptable losses during market downturns and can also be a drag on performance during market upturns. Regardless of the market environment, partially tactical management will typically have some exposure to every asset class.
The fully tactical but non-diversified management style generally allows for movement to 100% stocks, 100% bonds or 100% cash depending on their market analysis. However, it commonly follows only one methodology. During any given period, a particular methodology may or may not be in favor. Limiting a strategy to only one style can expose clients to unacceptable losses when it cycles out of favor.
It is our philosophy that proper tactical investment management should be based on determining current short to long-term market trends and countertrends. It should allocate money to the appropriate investment style or area dictated by the trend, following actual diversification principles.
It is essential to make these decisions based on verified trends only, rather than based on the news or market action of the day. This results in being positioned in the right investments at the right time or out of the market completely when necessary.
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