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What is Dynamic Asset Allocation for?

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Edited by Helene Viel, Monday, 25 Dec 2023, 17:47

There are many different types of risk management. The dynamic asset allocation allows us to adapt a portfolio to an international or regional market situation and increase its performance.

Dynamic asset allocation is a portfolio management strategy that frequently adjusts the mix of asset classes to suit market conditions. 

How to optimise the risk-return ratio? 

In that case, we choose appropriate weights for the various asset classes. Adjustments usually involve reducing positions in the worst-performing asset classes while adding to positions in the best-performing assets. (Dynamic Asset Allocation: What it is, How it Works (investopedia.com))

There are three types of asset allocation: Variations on:

- MVO = Risk Parity; Black Litterman

- CAPM = 60/40; Portfolio insurance; Surplus optimisation

- Dynamic = Tactical asset allocation; Currency overlay; Diversified growth funds

Passive Investing Theory, part four: Portfolio Theory (sensibleinvesting.tv)


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