Asset Allocation: Strategies

Asset Allocation: Strategies

Intuition Publishing
Updated Sep 24, 2020

Diversification enables investors to mitigate risk by reducing their dependence on the performance of one single investment. It can reduce the volatility of a portfolio below a simple weighted average of the volatilities of the constituent assets. We can break down diversification strategies under two broad headings, strategic asset allocation and tactical asset allocation. We explore the different forms under each of these headings and the main determinants on these strategies.