|Are You Confused By "Tactical" Versus "Strategic" Asset Allocation? I Am|
|Tuesday, July 24, 2012 20:54|
It’s time that we started using more meaningful and appropriate words to describe asset allocation. I recommend we replace the words “Tactical” and “Strategic” with “Variable” and “Static.”
“Variable” asset allocation structures should be further classified as “Scheduled,” like target date glide paths, or “Reactive,” like market timing.
“Tactical” is currently used to mean “Variable.” Its dictionary definition is “made or carried out with only a limited or immediate end in view.” “Strategic” is currently used to mean “Static.” Its definition is “identification of long-term or overall aims and interests and the means of achieving them.”
Not all Variable asset allocations are Tactical. Target date fund glide paths are Variable because of long-term or overall aims and interests and the means of achieving them. TDFs are Scheduled Variable, whereas market timing is Reactive Variable. For a fun interactive example of Scheduled Variable asset allocation, please visit Target Date Allocation.
The terms “Tactical” and “Strategic” have bugged me for years. “Static” and “Variable” are better descriptions.
Who else besides me would like to see us move to these better descriptions?