When you invest, the way you split your money between different types of assets—like shares, property, bonds, or cash—can have a big impact on your returns and how much risk you take on.
Two common approaches are Strategic Asset Allocation (SAA) and Tactical Asset Allocation (TAA). They work quite differently, so it’s important to know which one suits you best.
This guide explains what each approach means, how they work, and when you might use them.
What Is Strategic Asset Allocation (SAA)?
SAA is a long-term plan for how you want your money invested. You decide upfront what percentage of your portfolio will be in each type of asset, based on your goals, your tolerance for risk, and how long you plan to invest.
Once set, these percentages stay the same over time, regardless of short-term market changes.
Key Features:
- Long-Term Focus: You stick to your set mix, even when markets move up or down.
- Fixed Targets: For example, you might aim for 70% in growth assets (like shares) and 30% in defensive assets (like bonds or cash).
- Passive Approach: You’re not constantly reacting to the market.
- Rebalancing: Once or twice a year, you adjust back to your original percentages if market movements change the balance.
Goal:
To achieve steady, risk-adjusted returns over time by sticking to a disciplined plan.
Best For:
Investors who prefer stability and don’t want to actively manage their portfolio day-to-day.
What Is Tactical Asset Allocation (TAA)?
TAA is a more active approach. Instead of sticking to fixed percentages, you adjust your portfolio based on where you think the best opportunities are—or to reduce risk when markets look shaky.
Key Features:
- Short- to Medium-Term Focus: You make changes to take advantage of market conditions.
- Active Management: You (or your fund manager) regularly review the market and make adjustments.
- Market-Driven: Decisions are based on things like economic data, interest rates, or global events.
- Frequent Changes: Adjustments might be made several times a year.
Goal:
To boost returns or protect against losses by responding to current market conditions.
Best For:
Investors who have the time, knowledge, or a trusted adviser to actively manage their portfolio.
Key Differences Between SAA and TAA
| Feature | Strategic Asset Allocation (SAA) | Tactical Asset Allocation (TAA) |
| Time Horizon | Long-term | Short- to medium-term |
| Style | Passive | Active |
| Objective | Consistent, risk-adjusted returns | Higher returns or reduced short-term risk |
| Frequency of Changes | Rare (e.g. yearly) | Frequent |
| Decision Basis | Your personal goals and risk level | Market conditions |
| Rebalancing | Keeps original balance | Shifts to capture opportunities |
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When to Use Each Approach
Choose SAA if:
- You have long-term goals (e.g. retirement, children’s education).
- You prefer a “set and forget” style.
- You want to avoid frequent trading.
- You’re comfortable riding out market ups and downs.
Choose TAA if:
- You (or your adviser) actively monitor markets.
- You’re aiming to boost returns by timing market moves.
- You want flexibility to protect your portfolio during volatile times.
- You’re fine with more buying and selling.
Many investors use a mix of both—SAA for a stable foundation and TAA for extra flexibility.
Practical Tips for Any Strategy
- Know Your Risk Level: Understand how much risk you can handle before choosing a strategy.
- Set Clear Goals: Decide whether you want steady growth, income, or something more aggressive.
- Get Advice: A financial adviser can help tailor a plan to your needs.
- Check In Regularly: Even if you’re using SAA, review your plan at least once a year.
Final Thoughts
SAA gives you a clear, disciplined plan for the long term. TAA lets you take advantage of market changes along the way. The right choice depends on your goals, time, and how hands-on you want to be.
In many cases, a blend of both works well—giving you stability but also the chance to adapt when opportunities or risks arise.
If you would like to improve your current investment strategies or are looking to start your investment journey, click here to organise a complimentary 20-minute phone call with an EPG Wealth adviser.