Chartered Retirement Planning Counselor (CRPC) Practice Exam 2025 - Free CRPC Practice Questions and Study Guide

The strategy commonly used in tactical asset allocation is sector rotation. Tactical asset allocation involves actively adjusting a portfolio's asset allocation among various sectors or asset classes based on short-term market conditions and forecasts. By rotating investments into sectors expected to outperform the overall market while moving away from underperforming sectors, investors aim to capitalize on market inefficiencies or trends.

This approach is distinct from more static strategies such as long-term investing or asset diversification, which tend to focus on maintaining a steady allocation without frequent adjustments based on market conditions. While market timing and sector rotation may seem related, tactical asset allocation is specifically about adjusting exposure to various sectors rather than predicting overall market movements. Therefore, sector rotation is a fitting representation of a strategy employed within the tactical asset allocation framework.