Tactical Investing and Portfolio Construction: A Talk With Jeff Buetow of Innealta Capital

With tactical investing gaining increasing attention today amid continuining market volatility, I recently sat down with Jeff Buetow, founder of Innealta Capital, to gain his thoughts on tactical investing as it relates to today’s advisors. Innealta is an asset manager specializing in the active management of portfolios of ETFs and serves as a sub-advisor on the PMC Tactical ETF Portfolio Series.

Below is Part 1 of our exchange, in which we attempt to define tactical investing and compare it with other modes of portfolio construction.

Mike Henkel: What differentiates tactical asset allocation from other methods of asset allocation?

Jeff Buetow:  On some level, tactical approaches aren’t that different from other methods. If you’re an advisor who attempts to rebalance client portfolios, in a smart way, as client circumstances or market dynamics shift, you are employing a somewhat tactical approach. In general, a tactical manager would make more frequent allocation shifts to respond to short-term market dynamics than a non-tactical manager.

Mike Henkel: How is tactical allocation similar to other methods of asset allocation?

Jeff Buetow:  Within the context of smart investing, which I define as adhering to the concept of a well-diversified portfolio, both tactical and traditional strategic allocation ultimately have the same overall investment objective. That objective is balancing portfolio risk in a smart way, while simultaneously managing an investor’s growth and preservation needs. Tactical and strategic allocations are attempts at meeting the investment objectives of long-term investors.