What Are Tactical Allocation Funds?

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  • Written By: Mary McMahon
  • Edited By: Shereen Skola
  • Last Modified Date: 17 September 2018
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Tactical allocation funds hold assets in a mixture of categories in an attempt to decrease vulnerability to market shifts. Investors can purchase shares in these funds for varying amounts per share, with some funds requiring a minimum purchase to buy in. As with other mutual funds, information about returns, performance, and fees is made available to investors to help them make informed decisions. Investors can also look at reports in financial publications to get more information about the products available.

In this type of investment strategy, the fund manager does not stick with one type of asset, like stocks. Instead, tactical allocation funds mix their assets, including a variety of financial products in the overall investment blend. Fund managers also monitor short term forecasts to determine when to buy and sell. The result is a dynamic fund managed by someone who periodically adjusts the balance of investments to take advantage of market trends and avoid problems that may arise in the future.

Essentially, such funds include diverse investments to protect their investors, and instead of remaining static, they are actively managed. This differs from other types of mutual funds. Some funds focus on specific kinds of assets, like stocks, while others may mix assets, but do not regularly update and adjust to adapt to changing market conditions. Mutual funds without a dynamic approach can be vulnerable to short term shifts, although they may be able to balance that out with stability in long term performance.


The best choice for investors considering tactical allocation funds can include a number of factors. Some investors can afford to take a long approach while others may be counting on short term returns. Dynamic funds can be more suitable for short term investors because they allow for quick profits in response to changing market conditions. For others, they may be more risky, or may fail to meet investment needs. Although tactical allocation funds are diversified, it is also important to avoid sinking all investment activity into a single fund, as this could make an investor very vulnerable.

Openly listed tactical allocation funds can be found in financial publications with basic information about returns for their members. Their annual reports also provide more information and are available be request. Some funds may have more closed membership, as for example in the case of funds that limit participation with a large minimum balance to attract big investors. Investors with an interest in fund membership who are not sure about where to start could consult a financial adviser for recommendations.



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