A Closer Look at Target Retirement Funds and How They May Affect Your Investment Allocation
By CHM on Dec 18, 2007 in Psychology Behind Financial Planning | 2 Comments
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Over on Generation X Finance, Jeremy wrote a post titled What Asset Allocation Strategy Do You Use? He offered up three different allocation strategies for visitors to choose from.
The three major asset allocation strategies are:
- Strategic asset allocation. A passive buy-and-hold strategy where asset weights are set for a long period of time and only rebalanced when necessary.
- Tactical asset allocation. An active, market-timing strategy that responds to changing markets by trying to take advantage of new trends.
- Core-satellite asset allocation. This strategy divides a portfolio into a core set of holdings of a few index funds or total market holdings with a few small satellite holdings that provide additional return or diversification for the portfolio.
I commented that IMO, most investors should stick to the strategic asset allocation, which my readers know I advocate here all the time. But where I think the discussion really heated up was in the comments section.
