Global Macro Trading And The Benefit Of Tactical Asset Allocation

Tactical asset allocation and global macro trading have many similarities. The basic idea behind both strategies is to look at each asset class to help determine where you can get the best risk adjusted return. The similarities are so strong that many people refer to both strategies as the same thing.

Regular asset allocation will decide upon a fixed percentage of asset in each category and then rebalance once a year in order to keep the allocation the same. Global tactical asset allocators will instead look at the prospects for each asset class and then allocate. As things change they will then change the allocations. Essentially a tactical asset allocator is like a global macro trader because they will look for the best opportunities and then sale up or down as the case may be.

Obviously tactical asset allocation has a lot of similarities with global macro investing. The primary difference is that with global macro you don't feel the need to allocate to any market where you dont think the rewards outweigh the risks.

So what is the difference between global tactical asset allocators and global macro traders? There are two primary differences. One is that most tactical asset allocators have a three to five year time horizon whereas most macro traders will be looking at a few months to a year or so for most of their ideas. Another primary difference is that most macro traders are not trying to only beat their benchmarks but also beat the zero line, meaning that they are aiming for absolute returns.

Essentially tactical asset allocation brings together global macro as well as traditional asset allocation in order to try and achieve market like or better returns with below market volatility. In fact over time one of the number one things that tactical asset allocation has done is to reduce risk. And as traders the world over know, reduction of risk can do wonders for your long term results.

Since tactical asset allocators and global macro traders have so much in common it makes sense for both of them to learn from each other and use the useful tools and methods they have developed. Most traders would be wise to adopt tools from a variety of practitioners.

Combining asset allocation principles along with global macro strategies can help you in your investment results. The truth is that anytime you can do something to get a better grip on true value of an asset class and the potential return the better off you are. If you are into global macro then you are well advised to look into tactical asset allocation as well.

Article by: DagnyTaggart | Total views: 46 | Word Count: 434

About the Author

Dagny helps investors find great Global Macro Trading opportunities. Tactical Asset Allocation is but one of the many strategies that we use to help find the best risk to reward opportunities across the globe.