What is tactical investing, and why should you use it?

Investors in 2024 navigated a difficult environment shaped by persistent inflation, rising interest rates, and global uncertainty. These conditions made it harder for a traditional buy-and-hold strategy to deliver steady results. Tactical investing offers an alternative approach that allows you to adapt your portfolio, react to changing conditions, and identify opportunities as they appear.

What is tactical investment?

Tactical investment is an active method where you adjust your portfolio based on short-term movements and current economic signals. Instead of holding the same mix of assets for long periods, you make changes over a shorter horizon, usually between six and eighteen months. The goal is to benefit from market inefficiencies, manage risk as it develops, and make decisions supported by timely information.

Strategic vs. Tactical Investing

One of the main principles of Strategic Investing is that it should be done over a long period of time and therefore it needs to be consistent. An investor creates a portfolio of different assets and maintains the investment through different phases of the market. Such an approach will keep expenses at a low level due to fewer operations but the investor can miss short term opportunities and his portfolio can suffer bigger losses during sudden and steep market downturns. Tactical investing, on the other hand, is more flexible and adjusts its position according to prevailing market conditions instead of waiting for long term trends.

Benefits of Tactical Investing

Tactical investing goal is to increase the yield by moving to the departments or the asset classes that are showing the best performance. Besides, it helps to control the risk because you can decrease your exposure when the warning signs indicate a possible drop. Another benefit is the individuality of the portfolio. A customer of 25 years can have a development oriented portfolio, whereas a person who is about to retire can focus on safety and getting a regular income.

Strategies and Techniques

Tactical investing starts with an analysis of the market, figuring out the state of the economy with the help of economic indicators, valuation measures, and technical tools. Then, by using a dynamic asset allocation, it is possible to transfer funds from stocks, bonds, commodities, or real estate to one another. The changes in timing are of a cautious nature, made with the help of patterns, sentiment, and forecasts to recognize the points of suitable entry and exit.

Conclusion

Tactical investing has the advantages of being flexible and having the potential to achieve higher results, but at the same time, it requires the investor's attention, a well thought out plan, and consistent decision making.

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Gili is a passionate writer and curious thinker, dedicated to exploring a wide range of general topics that spark interest and discussion.