There are various types refined and focused asset allocation strategies. These include:

·         Strategic Asset Allocation- It refers to the long term asset allocation sought to achieve an ideal mix of risk and return. Strategic asset allocation generally implies a buy-and-hold strategy, even as the shift in the values of assets cause a drift from the initially established policy mix. For this reason, you may choose to adopt a constant-weighing approach to asset allocation. With this approach, you continually rebalance your portfolio. For example, if one asset was declining in value, you’d purchase more of that asset, and if that asset value increases, you would sell it.  

·         Tactical Asset Allocation-It is an active management portfolio strategy that rebalances the percentage of assets held in various categories. This is done in order to take advantage of market pricing anomalies or strong market sectors. The strategy allows portfolio managers to create extra value by taking advantage of certain situations in the marketplace. It is as a moderately active strategy, since managers’ return to the portfolios original strategic asset mix when desired short-term profits are achieved. The objective of this form of asset allocation is to earn above average returns through an opportunistic shift in the asset mix in response to changing patterns of rewards in the capital market.  

·         Drifting Asset Allocation- It is more of a passive strategy that replicates the ‘buy and hold’ stand. No rebalancing is done irrespective of relative values.  

·         Balanced Asset Allocation- Under this approach, the portfolio is rebalanced periodically towards maintaining the long term normal asset mix. By following the balanced asset allocation (constant policy mix), the investor ends up buying the stocks as they fall and selling stocks as they rise.  

·         Dynamic Asset Allocation- This involves changing the asset mix in response to changing market conditions. Investors change their asset allocation as time goes on and as new information becomes available. By following this strategy, the investor ends up selling stocks as they fall and buying stocks as they rise.

This is just a brief insight into the different asset allocation strategies available and one may adopt the strategy that suits one’s specific situation best.

While all these strategies have been developed to earn better returns from our investments, the suitability of these varies with the prevalent market conditions and our own personal situation.