Should we deploy our capital right away, dollar cost average every month or await the results of the next election?

After initially defining the investment object, the strategic allocation (weighted assets) and selection criteria, you should be all set. But then there is always someone who would like to discuss the timing of the asset purchases…

The tactical allocation , or market timing, is the change of the weighting of asset classes in relation to the reference portfolio according to expectations in the various markets. The higher portfolio turnover rate (and the exposure to possibly more risks!) will likely impact taxation and costs. Everyone has an opinion about the market direction and you can spend countless hours trying to find a compromised view which may or may not improve the portfolio performance. But it will drain your energy and time, and of course boost your transaction costs.

The time spent discussing is also time when the capital is not at work. Unless you have a good process for taking decisions regarding tactical allocation you might be better off by agreeing to always deploy all incoming capital immediately according to your strategic allocation.

Really?

Interestingly, studies show that 91,5% of the volatility of return measurements is due to strategic allocation decisions. The tactical allocation has almost no impact – hence, stop wasting time discussing it!

But, if you work alone, you can of course time the market. But make sure your investor has asked for it. Most professionals would not want a salaried employee tweaking their investments back and forth.

Lastly, if you are periodically re-balancing your portfolio according to a weighted principle, you are in fact “selling high and buying low” and timing the market. But don’t text me about it.