Moneyzine
Contents
/Investment Guides /Dynamic Asset Allocation (DAA)

Dynamic Asset Allocation (DAA)

Moneyzine Editor
Author: 
Moneyzine Editor
1 mins
January 16th, 2024
Advertiser Disclosure
Dynamic Asset Allocation (DAA)

Definition

The term dynamic asset allocation refers to an investment approach that actively rebalances the assets in a portfolio in response to market conditions. Dynamic asset allocation typically involves moving the funds from one asset class to another based on the portfolio manager's longer-term performance expectations.

Explanation

Dynamic asset allocation, also known as DAA, refers to an active investment strategy that adjusts the allocation of assets in a portfolio in response to longer-term performance expectations. This strategy is typically used with investments such as mutual funds, index funds, and hedge funds.

The objective of DAA is to maintain a mix of asset classes that are aligned with the investor's desired risk exposure as well as their expectations of future performance. Unlike strategic asset allocation (SAA), there is no target mix of asset classes to maintain. The portfolio manager will change allocations based on their forecasts of market trends. While a tactical asset allocation (TAA) fund will actively change their investments based on near term trends, dynamic asset allocation takes a longer term view. In terms of a rebalancing continuum, TAA is the most active, SAA the least active, and DAA falls somewhere in between these extremes.

Related Terms

  • Market Volatility Strategy
    The term market volatility strategy refers to the approaches investors can take when the market is rising or falling in relatively short timeframes. Market volatility strategies start with the construction of investment portfolios that match the individual's risk profile.
    Moneyzine Editor
    Moneyzine Editor
    November 6th, 2024
  • Capital Growth Strategy
    The term capital growth strategy refers to the creation of an investment portfolio that seeks to maximize value in the long term. A capital growth portfolio will allocate more than half of the fund's assets to equities.
    Moneyzine Editor
    Moneyzine Editor
    January 10th, 2024
  • Defensive Investment Strategy
    Investments do bring profitable returns to investors, but these are associated with some form of risk that may incur losses to investments. A defensive investment strategy saves investors by minimizing these losses and rebalancing the portfolio.
    Hristina Nikolovska
    Hristina Nikolovska
    January 15th, 2024
  • Aggressive Investment Strategy
    The term aggressive strategy refers to building an investment portfolio that attempts to increase returns by purchasing a larger proportion of higher-risk securities. It typically involves allocating a large portion of the portfolio's funds to equities.
    Hristina Nikolovska
    Hristina Nikolovska
    November 6th, 2024
  • The term strategic asset allocation refers to an investment approach that rebalances the allocation of assets in a portfolio to achieve a long-term target. Strategic asset allocation typically involves moving the funds from over-performing asset classes to those that are underperforming.
    Moneyzine Editor
    Moneyzine Editor
    September 21st, 2023

Contributors

Moneyzine Editor
The Moneyzine editorial team consists of writers and content specialists with diverse backgrounds.
Moneyzine 2024. All Rights Reserved.