Target date funds, according to this article, are suddenly filing for changes that allow tactical asset allocation. We’ve written frequently about the potential hazards in having a fixed glidepath that piles into fixed income as a client ages, not to mention the issues inherent in strategic asset allocation generally. As one expert points out, “target-date asset allocation theory does not survive a down market.”
This should not be a surprise. We have advocated a tactical asset allocation approach from day one, because markets do a lot of things that finance textbooks say they shouldn’t. The most important thing is not which theory of market behavior you believe, but having the ability to adapt as conditions change. We believe relative strength is the mechanism most capable of building adaptability into portfolios of all kinds.
