Tactical asset allocation

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Tactical asset allocation is a method of investing in which investors modify their asset allocation according to the valuation of the markets in which they are invested. Thus, someone invested heavily in stocks might reduce his position when he perceives that other securities, such as bonds, are poised to outperform stocks. Unlike stock picking, in which the investor predicts which individual stocks will perform well, tactical asset allocation involves only judgments of the future return of complete markets or sectors. As such, it is a natural supplement to mutual fund investing, including passive management investing.