However, does it make sense to constantly have this kind of outsized exposure, whether in an index fund or by holding the stocks individually? Tactical allocation can also make sense when some equity asset classes are outperforming others by a long shot. Fortunately, technology is enabling more precision when it comes to tactical allocation. Simply put, tactical allocation allows investors to shift from overvalued asset classes to those that are currently undervalued. A good tactical strategy, helped by a true allocation model or advisor who uses tactical allocation, can help avoid some of the pain inherent with asset-class underperformance.

Source: Forbes April 18, 2021 16:30 UTC