Understanding Asset Allocation Implementation

Very Easy Asset Allocation Asset Allocation Implementation

Michael is a portfolio manager for a small investment firm. He has recently been tasked with implementing a new asset allocation strategy for their clients. The firm focuses on balancing risk and return based on the client's investment goals and time horizon. Michael is considering three options for asset allocation.

Which of the following describes the most common approach to asset allocation implementation?

Using a tactical asset allocation strategy to take advantage of short-term market movements.

Applying a strategic asset allocation that aligns with the client's long-term goals and risk profile.

Adopting a simulation-based approach to determine optimal allocations across various asset classes.

Hint

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