8.2 Asset Allocation Strategies
Asset allocation strategies establish the proportion of a portfolio invested in equities, debt, cash, and alternatives to meet client objectives.
Key NASAA Exam Takeaways
- Strategic Asset Allocation sets long-term target weightings based on risk tolerance and horizon, periodically rebalancing back to benchmark.
- Tactical Asset Allocation actively deviates from strategic targets to capitalize on short-term market anomalies or sector momentum.
- Core-Satellite Strategy combines a passive, low-cost core (e.g., 70-80% index ETFs) with actively managed satellite positions.
- Rebalancing enforces selling winners at highs and buying underperforming asset classes at lows.
Knowledge Checkpoint • Section 8.2
An investment adviser establishes a baseline 60% stock / 40% bond allocation for a client. Believing that semiconductor stocks are poised for a near-term surge, the adviser temporarily shifts to 70% equities. What strategy is being used?