Dynamic asset allocation can adapt to changing market conditions from "summary" of All About Asset Allocation, Second Edition by Richard Ferri
Dynamic asset allocation involves regularly adjusting the mix of assets in a portfolio to respond to changing market conditions. This strategy aims to optimize returns while managing risk by shifting investments based on economic indicators, market trends, and other factors. By actively monitoring the environment and adjusting allocations accordingly, investors can take advantage of opportunities and protect against potential losses. One key benefit of dynamic asset allocation is the ability to capture growth in different market sectors as conditions evolve. For example, during periods of economic expansion, an investor may increase exposure to equities to capitalize on rising stock prices. Conversely, in times of market downturns or increased volatility, the allocation can be shifted towards more stable assets like bonds or cash to reduce risk. Another advant...
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