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What is dynamic asset allocation?

The general premise of dynamic asset allocation is to respond to current risks and downturns and take advantage of trends to achieve returns that exceed a targeted benchmark, such as the Standard & Poor’s 500 index (S&P 500). There is typically no target asset mix, as investment managers can adjust portfolio allocations as they see fit.

What is asset allocation?

Specifically, asset allocation is your division of capital into different asset categories – traditionally stocks, bonds, and cash. Your risk tolerance and investment time horizon come into play, as they influence the proportion of capital you dedicate to each category.

What are the disadvantages of dynamic asset allocation?

However, drawbacks include active management, higher transaction costs, underperformance, and difficulty predicting market conditions. Note that dynamic asset allocation can be a powerful tool for investors, but it requires careful evaluation and monitoring.

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