Asset allocation
An Asset Allocation defines the distribution of investments among asset classes.
Strategic asset allocation (SAA): long term composition of asset classes.
Tactical asset allocation (TAA): Taks advantage of short term opportunities in the financial market.
Common types of SAA
The five most commonly used types of SAA are:
- Bonds only (no equity)
- Income oriented (~ 25% equity)
- Balanced (~ 25% equity)
- Growth oriented (~ 75% equity)
- Equity only
Weight notations
To top: Weights are relative to the top node (the sum of all weights = 100%)
To parent: Weights are relative to the immediate parent (the sum of all immediate children of a node = 100%)