Asset Allocation is to diversify your money into different types of asset investments, not an asset in particular. The focus is on choosing asset investments that you can determine the investment port ratio, no matter they are Mixed Stocks, Bond, Real estate, Gold, or Cash in order to achieve investment goals. Consideration is made by expected returns from each asset to determine the investment ratio according to the investor’s risk tolerance and investment time frame. There are 6 asset allocation strategies in managing investment port.

Strategic 1: Strategic Asset Allocation

It’s a portfolio strategy that the investor sets each target allocation in order to achieve a long-term investment goal (over 1 year) by managing funds to cover global assets, such as Thai stock, foreign stock, Thai bond, foreign bond, and Alternative assets like gold. The methods of allocations are based on factors, such as individual risk level and the overall port returns as expected.

This strategy works well for investors who emphasize long-term investment or those who don’t have time to follow daily investment updates. That’s why investors determine each asset ratio regarding their risk tolerance and expected returns since the beginning. Also, they are able to reduce investment expenses as they don’t often adjust their ports.

However, this strategy doesn’t fit the economic crisis period as it will lead the investment market to severe fluctuation. If investors don’t adjust the port at that time, some assets in the investment port may encounter loss.

Strategic 2: Constant-Weighting Asset Allocation

It’s a type of asset allocation approach which emphasizes rebalancing and then returning to the ratio as previously set. When the asset value changes and makes the asset ratio in port different from the original policy, investors have to rebalance their portfolios.

This strategy will help investors consider selling assets when their value is higher than the actual price, and reallocate it for investing in assets when its price is lower than the actual price. That is to rebalance returns and risk as set earlier.

This strategy fits those who emphasize long-term investment and can manage time to follow investment progress. Investors will rebalance the investment port when they see that asset value changes from the previous goal. A disadvantage is, this strategy doesn’t suit investors whose decision to adjust their port is driven by emotion, not reason.

Strategic 3: Tactical Asset Allocation

Even though asset allocation and long-term investment goals are targeted, some situations or factors may affect investment along the way. Thus, investors need to adjust the investment ratio according to each market situation to allow investment flexibility, and to keep proper risk level and returns, such as setting an investment goal in Thai stock at 50% and investing in Bond 50% in one year. If the situation changes, such as during economic early recovery; foreign investors are back to buy Thai stocks and export is obviously expanding, investors can increase the investment ratio in Thai stock and Bond to 70% and 30%, respectively.

This strategy is ideal for investors who have high discipline in investment and follow news and progress closely because they need to rebalance to keep proper risk levels and returns in line with the market change and to cope with the uncertainty of economic trends. Therefore, this strategy doesn’t fit those who aim to achieve a long-term goal or those who don’t have time to follow daily investment updates.

Strategic 4: Dynamic Asset Allocation

It’s an investment adjusted by the ups and downs of the market or the overall economic situation. Investors will consider investing in each asset rather than allocating the asset ratio, such as when forecasting that stock price will go down, investors should sell it to reduce the risk of loss, and then invest in another asset that gains benefits in that market situation.

This strategy is best for investors with a high-risk tolerance and has investment experience because precise ratios and time frames will not be determined, and the focus is on returns only. This strategy suits well with Institutional investors or Fund Managers so it’s not good for beginners, and those who are not diversified enough to manage risk because trend forecasting needs high experience.

Strategic 5: Insured Asset Allocation 

This strategy emphasizes active investment and asset allocation with fixed base returns. Thus, buying, holding, and selling will focus on returns not lower than the target, and asset investment will be managed to gain returns as much as possible.

This strategy is suitable for risk-averse investors or those who worry about fluctuation. However, there is flexibility to adjust investment plans to increase returns. Therefore, this strategy doesn’t fit investors with a high-risk tolerance.

Strategic 6: Integrated Asset Allocation 
 

This strategy emphasizes investment that is concerned with economic factors, circumstances, and risk according to investment pattern. Thus, investment assets will be in accordance with risk, including a variety of asset types and strategies. Apart from expected returns in the future, there is concern about potential returns along the way. Anyway, adjusting the investment port is ready in case there are unexpected situations.

This strategy fits those with investment experience and is able to estimate investment trends in the short term, moderate term, and long term. Investors can adjust investment port all the time regarding their risk tolerance and expected returns. Therefore, this strategy doesn’t suit those who focus on long-term investment goals or those who don’t have time to follow investment updates.

In summary, all strategies need to consider the overall economic climate and current situation which may have an impact on investment, risk tolerance, expected returns, and the investor’s age. Moreover, investors have to be ready to cope with changes and will need information, all-around analysis, or advice from investment experts in order to select an effective strategy that best fits them.