Tactical Asset Allocation Around The Globe
Tactical asset allocation combines a mix of stocks, bonds, real estate, and cash equivalents in one portfolio making it easier to invest and track. Tactical asset allocation should take into consideration investment opportunities around the globe not just in one’s home area. As time goes on, your asset allocation mix (and location of assets) should be adjusted as you approach your retirement years. Knowing when and how to do this are part of the tactics behind your asset allocation.
Asset allocation funds contain a specific mix of stocks and bonds at any given time, which should be adjusted as the years go on. The proportion of investments in the various markets in these asset funds should also be adjusted overtime. The principle behind this is that, because of their volatility, risky investments (such as stocks) in risky markets (such as Brazil) need to be held over the long run to realize a return. The closer you get to retirement, the safer you want your money and, therefore, the less risk you want to take on. This basic standard forms the foundation for tactical asset allocation.
Another part of tactical asset allocation is to know in detail what you are investing in-no matter where the investment is located around the globe. Before you set up your asset allocation plan, research the companies that will be in the portfolio you create. Know which sectors in which countries are the strongest. Perhaps your ideal asset allocation mix would combine US real estate, financial sector stocks in Switzerland, and investments in commodities such as steel in China.
When it comes to investing around the globe, it pays to be analytical. Familiarize yourself with how to calculate a ratio (such as expense or liquidity) for a given company. Are their expenses to high? How much outstanding debt do they have? And how much available cash do they have to cover themselves in times of slow business? Ratios are an excellent tool for evaluating business decisions. The less you know, the more it could hurt you and the more risk you will take on. Make it a point to build research and analytics into your tactical asset allocation model.
As part of your tactical asset allocation plan, you should try to put a percentage of your money into tax-free investments. A Roth 401k for example is a retirement plan that invests your after-tax dollars into mutual funds of your choice. This can be a great tactic for investors who feel they may be in a higher tax bracket upon their retirement. With a Roth 401K, they can withdraw their money TAX FREE. No matter what the tax rates are at that time, your money is your money.
Determining your tactical asset allocation mix around the globe is not easy, and plans will vary by person. By keeping these tactics in mind, you will be able to create a dynamic portfolio for yourself that matches your individual financial goals and risk tolerance levels, and you will reap the rewards for years to come!
Max Smith is a successful Internet entrepreneur, business coach and author, specializing in income production, wealth management and international investment diversification. He is a Qualified Veterinarian and over the years he has successfully invested in stocks and stock options, owned several successful businesses and has been investing in residential and commercial real estate since 1970.
Over his forty years of investing, Max has developed his Geographical Diversification [http://www.geographicaldiversification.com/articles] strategy. The fundamental principle is that even during a time of global financial stress-such as we are currently witnessing with the Great Recession-there are still pockets of financial abundance.
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