What is tactical asset allocation primarily focused on?

Tactical asset allocation primarily focuses on adjusting asset allocations based on current market conditions. This investment strategy allows portfolio managers and investors to capitalize on market inefficiencies and take advantage of short-term market movements by shifting the weights of different asset classes within a portfolio. Tactical asset allocation differs from strategic asset allocation, which maintains a long-term, fixed allocation irrespective of market fluctuations.

Investors employing tactical asset allocation may increase their exposure to asset classes that they believe are undervalued or reduce their exposure to those they believe are overvalued, thereby aiming to enhance overall portfolio performance. This approach requires ongoing analysis and active management to respond to changing economic and market conditions effectively.