The weakness of building investment portfolios using Modern Portfolio Theory (as described in the Fund Portfolios section), is they are a buy and hold strategy. In other words, a portfolio of 60% stocks and 40% bonds will always have that mix of stock and bonds no matter what is occurring in the stock and bond markets.

A tactical fund manager adds another strategy layer to a portfolio, by moving investment funds out of the stock market and into bonds or cash when there is excess stock market volatility to protect the portfolio from a major stock market sell-off.

A tactical manager IS NOT trying to buy low and sell high - what is known as market timing.

The concept is to smooth out returns so your portfolio avoids most of a major stock market downturn.

Each tactical manager has its own distinct process of how they determine when to move a portfolio to a protected position (partially or fully) when there is excess market volatility. They have different methodologies or algorithms that signal when they should move in or out of the stock market. Most tactical managers use exchange traded funds (ETF’s) in their portfolios.

Our experience is that when there is a major stock market downturn, individual investors make poor decisions regarding their investment portfolio. Those emotional decisions are understandable but can have negative long-term impact.

By using a tactical manager, we can help people avoid the angst of a stock market downturn and keep their goals and objectives from being disrupted by either volatile markets or poor individual decisions.

You might call tactical management a loss-averse investment approach.