Strategic Asset Allocation Strategy
Strategic asset allocation strategy is a portfolio management strategy, which includes periodical adjustments of investments with respect to the long-term goal. The basic idea is to diversify the investments and limit the portfolio volatility. But strategic asset allocation strategy does not include over-investing in either high-profit or low-risk securities.
In general, strategic asset allocation strategies do not consider the short-term performances of allocated assets. They only look for long-term performances, which is often positive to almost all investments. For example if stocks grow at 10% and bonds at 5% annually, then with a 50-50 asset allocation 7.5% yield is predicted, and the portfolio manager adjusts asset allocation to meet this yield.
Strategic asset allocation strategy requires long-term anticipation and forecasting. Portfolio managers consider various economic indicators and industry performances when readjusting the investments. If higher inflation rate is expected then more investments are done in stocks and commodities and less in fixed-income securities. Even the asset allocation for stocks can vary considerably; if low inflation is predicted then growth stocks and/or small-cap stocks are preferred and if high inflation is predicted then value stocks and/or large-cap stocks are preferred.
In general, strategic asset allocation strategies do not consider the short-term performances of allocated assets. They only look for long-term performances, which is often positive to almost all investments. For example if stocks grow at 10% and bonds at 5% annually, then with a 50-50 asset allocation 7.5% yield is predicted, and the portfolio manager adjusts asset allocation to meet this yield.
Strategic asset allocation strategy requires long-term anticipation and forecasting. Portfolio managers consider various economic indicators and industry performances when readjusting the investments. If higher inflation rate is expected then more investments are done in stocks and commodities and less in fixed-income securities. Even the asset allocation for stocks can vary considerably; if low inflation is predicted then growth stocks and/or small-cap stocks are preferred and if high inflation is predicted then value stocks and/or large-cap stocks are preferred.
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posted by Daniel Pipitone at
3:34 AM
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