In the midst of a rip roaring bull market talk about tactical asset allocation is not exactly cool.  However the financial crisis and the bear market that followed demonstrated to many investors the value of tactical asset allocation.  Those investors who were able to ride out the bear market in assets like bonds and cash had a huge advantage over those investors who were ‘all-in.’  One example of this was the Ivy Portfolio that utilizes the 200 day moving average as a signal to enter/exit various asset classes.  Investors never satisfied with leaving things alone are interested in trying to build on these signals.  One approach is using a valuation overlay.  Another approach is to further slice and dice asset classes into smaller segments.  The first approach is technically difficult.  The second approach at some point reaches a point of diminishing returns.  Both approaches represent the perpetual challenge facing model builders:  simplicity vs. complexity.  In today’s screencast we take a look at the use and challenges of TAA models.

Items mentioned in the above screencast:

Measuring performance of the Ivy Portfolio. (dshort)

How do you compare valuations across asset classes?  (World Beta)

At what point does slicing and dicing asset classes no longer make sense?  (Capital Spectator)

What some TAA models are saying at the moment.  (MarketSci Blog, TAA for the Masses)