Tactical adjustments

Tactical investing involves deliberately overweighting or underweighting certain market segments or industry sectors based on your assessment of market or economic cycles.

Market-capitalization-weighted ETFs offer an efficient way to target the desired tilt. 

For example, if you believe that after a protracted period of outperformance by value stocks the pendulum is likely to swing the other way, you might invest in a growth-oriented ETF.

 

Illustration showing the correction of a portfolio in which value stocks are expected to outperform growth stocks by overweighting investments in growth-oriented ETFs.

Source: Vanguard. This hypothetical investment or portfolio strategy is shown for illustrative purposes only and shall not be construed as a recommendation to buy or sell any security or financial instrument, or an offer or recommendation to participate in any particular trading or investment strategy.

Points to consider

  • You could end up doing worse than if you'd made no changes at all. 

  • Whether buying or selling, you would have to be right about the direction of the market/economic cycle, the sectors that might profit from it and the timing of the investments.

  • Concentration in any security, industry sector, market segment, region or asset class can lead to greater risk relative to a diversified portfolio.