Quick Finance Tip – Risk Budgeting and Tactical Asset Allocation

​Risk budgeting is the process on assuming amounts of risk for a portfolio, and then effectively, allocating that risk over the “sources” that renders returns. On the other hand, tactical asset allocation is the decision to purposefully deviate from exposures in relation to systematic risk variables, with the intent to add incremental returns for short-term “wins”. Therefore, for this “active” implicating decisions, it is important that there are proper controls and time made, during the security selection process.