As a seasoned investor, you know the value of effective asset allocation. But you can also unlock additional opportunities by taking traditional asset allocation one step further via an investment strategy known as dynamic asset allocation.
As you may already know, asset allocation is the practice of allocating investments across various asset classes, such as equity and fixed income, to best balance risk and reward for each investor.
You have your own unique risk tolerance, which differs from that of other investors. You also have your own asset allocation strategy based on your tolerance for risk, your financial goals and your investment timeline.
Dynamic asset allocation takes asset allocation to another level.
Through ongoing analysis of the global financial market, investment managers can uncover opportunities that still fit within the parameters of an appropriate pre-determined range of risk tolerance. The primary aim of such an investment is to reduce the impact of shorter-term market fluctuations, thus providing a smoother ride towards achieving your long-term financial goals.
Here’s an example of a fund portfolio guided by dynamic asset allocation principles:
The foundation of the fund is a strategic asset mix of fixed income, real property and equity investments.
The allocations around each type of investment are adjusted by a skilled investment professional based on ongoing assessments of the global financial market. Where the portfolio manager has a positive view on the global economy he may have a higher weight in equities without necessarily assuming the associated risk that is typical of more traditional equity funds. That’s because of the presence of several low volatility equity funds.
Dynamic asset allocation portfolios are typically available as unit trust, corporate class, T-series or fixed income funds.
A dynamic investment solution might be for you if you want to:
Have a more active management approach to your investments.
Have an expert portfolio management team taking care of day-to-day investment decisions.
And, depending on the portfolio you choose, obtaining tax-efficient income from your investments now or in the future (T-series) or deferring income tax on your investment (corporate class).
Speak to your professional consultant today to find out more about the benefits of dynamic asset allocation and how such a portfolio can work with your financial plan.
Andy Erickson is the division director with Investors Group, Vernon. This article is provided for information purposes only. Please consult with a professional advisor before implementing a strategy.