Strategic Asset Allocation
A long-term target mix of asset classes based on objectives and risk capacity, held through market conditions.
Formula
Test: target weights are set for the long term and changed only when circumstances change, not when markets move
Unit
%
In depth
The strategic allocation is the policy portfolio, and its whole value comes from being maintained: an allocation abandoned in a crash was never a policy, only a preference. It should be derived from the investor's horizon, income stability and ability to tolerate a fall, since these are knowable while market returns are not. Rebalancing back to the target enforces the discipline mechanically, selling what has risen and buying what has fallen. Changing it because markets have moved converts a strategic allocation into a tactical one, usually at the worst moments.
Worked example
A 60/40 target drifts to 70/30 after a strong equity year. Rebalancing sells 10 percentage points of equity — ₹1,00,000 on a ₹10,00,000 portfolio — precisely when it feels least appealing to do so.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Strategic Asset Allocation” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.