Returns depend on composition of assets

THERE are two main decisions to be made for a tactical asset allocation for individuals. The first is the modified split between asset classes, which deviates from the strategic asset allocation to take into account the macroeconomic assumptions in the near term. The second is to decide on the sub-asset classes for effective portfolio construction.

The chart (right) illustrates how a 60:40 split between equities and bonds can deliver a range of returns depending on the composition of the assets.

The US portfolio is based on S&P 500 Stock Index and the Ryan Labs 10-year Treasury Yields.