Trend following versus tactical asset allocation


I was not sure that the difference between the two was.

Does anyone know?

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My personal observation is “tactical asset allocation” is a term often used by people who are embarrassed to be caught market timing because they usually go around talking about how only a fool thinks he can time the market. You should buy & hold, /stay the course.

Trend following is a pretty vanilla way of timing the market altho I’m not sure it’s really timing since “time” doesn’t really figure into it. It’s just a way of taking what the market is giving you on the way up but not on the way down.


My perspective is that Tactical Asset Allocation involves, or uses, trend following.

Trend following is (of course) an approach, a tool that can be tailored for any investment, an appropriate metric for that investment (usually moving average), using any backtestable lookback period and any hold period (among others.) What trend(s) to follow and use for what time period is up to the user.

TAA (or GTAA or QTAA) as it’s typically referred to is a specific usage of trend following to determine when to enter and exit a specific asset class (US large cap, US small cap stocks, developed foreign large caps, etc.), usually through an ETF. The most common metric is the 10-month moving average, but the lookback of the moving average should be tailored to the behavior of the asset class (in my case, I use a 6 month lookback for real estate instead of the longer, as an example.)
In my case II, I have exited all asset classes because they are all below their <10M MAs.

By that definition, it could be argued that the MI screens that use trends (most of them use relative trends) are just an early form of TAA, applied to a specific asset class (US stocks in the VL or SIPro universes).

TAA is mechanical asset class-level timing. Nothing embarrassing about it.