| Different persons have different portfolio | | | | stocks and low-return/low-risk instruments such |
| management needs, some want to maximize the | | | | as treasury bonds. |
| return, some want to minimize risks with steady | | | | Evaluation of current trends and prediction of |
| investment growth, some want constant earnings, | | | | future trends on investments are very important |
| and some others want to earn more spending | | | | with dynamic asset allocation. Investors can use a |
| least time. Dynamic asset allocation is one such | | | | range of technical and fundamental analysis tools |
| portfolio management strategy which aims at | | | | for this purpose. Successful dynamic investors are |
| maximizing the portfolio return by active | | | | those who make right buy and sell decisions at |
| management of portfolio components. | | | | right time. |
| Dynamic asset allocation is one of the most | | | | Advantages of dynamic asset allocation strategy |
| active portfolio management strategies which | | | | involve |
| involve frequent/constant and quick adjustments | | | | |
| of investments inline with the performance of | | | | 1. Better return compared to other strategies. |
| investments over time and with the market | | | | 2. Better exploitation of opportunities as more |
| trends. Because of this active management | | | | investments are done in rising products. |
| dynamic asset allocation is considered as a risky | | | | 3. Low downside risk by avoiding declining |
| strategy and is not at all advocated for persons | | | | products. |
| with less investment knowledge, low capital and | | | | 4. Portfolio adjustment with changing local and |
| who have not time to monitor their investments. | | | | global economic situations. |
| Unlike two other popular portfolio management | | | | 5. Benefits from diversification of portfolio. |
| strategies, strategic and tactical asset allocations | | | | Disadvantages of dynamic asset allocation |
| strategies, dynamic asset allocation does not | | | | strategy involve |
| involve keeping a fixed investment ratio. Dynamic | | | | |
| investors diversify their investments by investing | | | | 1. Need of active portfolio management, |
| in equities, mutual funds, index funds, currencies, | | | | demanding money, time and tools. |
| derivatives and fixed income securities. They buy | | | | 2. Increased chance of loss due to poor market |
| instruments which are rising (or are predicted to | | | | interpretation and wrong decisions. |
| rise) and they sell instruments which are falling (or | | | | 3. Increased risk compared to other strategies. |
| are predicted to fall). Although not common, many | | | | 4. Many times keeping the right asset allocation |
| dynamic investors keep a reasonable proportion | | | | ratio and risk level is very difficult. |
| between high-return/high-risk instruments such as | | | | |