Tactical Asset Allocation

golub1

In an ideal world investors should have their funds invested in Tactical Asset Allocation funds within their risk range. Wouldn't everyone like a fund that makes shifts between equity classes, and between equity, cash,bonds, commodities, currencies etc. and makes the right move at more than, say 65% of the time? Are there any funds out there that have a record of doing this? If there are I suspect they are few in number. I've seen David sight BBALX and others, MDLOX, and there are high hopes for the relatively recent offering from T Rowe Price. Wouldn't it be great to select say three choices and just re-balance every now and then.

Any other candidates?

vkt

The concept is doomed to failure because shifting large allocations is not very practical or cheap even if you are able to time it well. Any fund with over $200-$250 million in assets is going to find it difficult to move their allocation significantly within a time frame that allows it to exploit the strategy. But that number is also the number that fund managers will tell you is about the minimum to make the fund viable for them to spend their time. Most are aiming for the fat fees of a much larger fund.

So new funds come up, some do well, get bloated and do tactical allocation in the edges which does not even move the needle of an otherwise buy and hold fund. Some funds may get lucky being in an overweight position in a sector that shot up but they find it difficult to then take profits and be overweight somewhere else to repeat the performance.

Individual investors or investment groups with enough time and skills are in a better position to do this than in the structure of typical mutual funds.

At best they can position it for smaller returns in long term trend changes, but returns are much less attractive as one wrong bet can throw it off.

golub1

vkt, good explanation. Would this be a more viable strategy for an ETF?